Correlation Between Global X and Invesco SP
Can any of the company-specific risk be diversified away by investing in both Global X and Invesco SP at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Global X and Invesco SP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global X FinTech and Invesco SP SmallCap, you can compare the effects of market volatilities on Global X and Invesco SP and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Global X with a short position of Invesco SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global X and Invesco SP.
Diversification Opportunities for Global X and Invesco SP
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Global and Invesco is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Global X FinTech and Invesco SP SmallCap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco SP SmallCap and Global X is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Global X FinTech are associated (or correlated) with Invesco SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco SP SmallCap has no effect on the direction of Global X i.e., Global X and Invesco SP go up and down completely randomly.
Pair Corralation between Global X and Invesco SP
Given the investment horizon of 90 days Global X FinTech is expected to generate 1.04 times more return on investment than Invesco SP. However, Global X is 1.04 times more volatile than Invesco SP SmallCap. It trades about 0.07 of its potential returns per unit of risk. Invesco SP SmallCap is currently generating about 0.02 per unit of risk. If you would invest 2,053 in Global X FinTech on August 23, 2024 and sell it today you would earn a total of 1,273 from holding Global X FinTech or generate 62.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global X FinTech vs. Invesco SP SmallCap
Performance |
| Timeline |
| Global X FinTech |
| Invesco SP SmallCap |
Global X and Invesco SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global X and Invesco SP
The main advantage of trading using opposite Global X and Invesco SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global X position performs unexpectedly, Invesco SP can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Invesco SP will offset losses from the drop in Invesco SP's long position.| Global X vs. SPDR SP Health | Global X vs. SPDR SP Health | Global X vs. Aquagold International | Global X vs. Morningstar Unconstrained Allocation |
| Invesco SP vs. SPDR SP Health | Invesco SP vs. SPDR SP Health | Invesco SP vs. Aquagold International | Invesco SP vs. Morningstar Unconstrained Allocation |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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