Correlation Between Invesco CurrencyShares and Vanguard Value
Can any of the company-specific risk be diversified away by investing in both Invesco CurrencyShares and Vanguard Value 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 Invesco CurrencyShares and Vanguard Value into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Invesco CurrencyShares Japanese and Vanguard Value Index, you can compare the effects of market volatilities on Invesco CurrencyShares and Vanguard Value 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 Invesco CurrencyShares with a short position of Vanguard Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco CurrencyShares and Vanguard Value.
Diversification Opportunities for Invesco CurrencyShares and Vanguard Value
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Invesco and Vanguard is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Invesco CurrencyShares Japanes and Vanguard Value Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Value Index and Invesco CurrencyShares 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 Invesco CurrencyShares Japanese are associated (or correlated) with Vanguard Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Value Index has no effect on the direction of Invesco CurrencyShares i.e., Invesco CurrencyShares and Vanguard Value go up and down completely randomly.
Pair Corralation between Invesco CurrencyShares and Vanguard Value
Considering the 90-day investment horizon Invesco CurrencyShares Japanese is expected to under-perform the Vanguard Value. But the etf apears to be less risky and, when comparing its historical volatility, Invesco CurrencyShares Japanese is 1.06 times less risky than Vanguard Value. The etf trades about -0.04 of its potential returns per unit of risk. The Vanguard Value Index is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 12,631 in Vanguard Value Index on December 6, 2024 and sell it today you would earn a total of 4,660 from holding Vanguard Value Index or generate 36.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Invesco CurrencyShares Japanes vs. Vanguard Value Index
Performance |
| Timeline |
| Invesco CurrencyShares |
| Vanguard Value Index |
Invesco CurrencyShares and Vanguard Value Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Invesco CurrencyShares and Vanguard Value
The main advantage of trading using opposite Invesco CurrencyShares and Vanguard Value positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco CurrencyShares position performs unexpectedly, Vanguard Value 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 Vanguard Value will offset losses from the drop in Vanguard Value's long position.The idea behind Invesco CurrencyShares Japanese and Vanguard Value Index pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
| Vanguard Value vs. Vanguard Growth Index | Vanguard Value vs. Vanguard Small Cap Value | Vanguard Value vs. Vanguard Mid Cap Value | Vanguard Value vs. Vanguard Small Cap Index |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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