Correlation Between Invesco KBW and Invesco SP
Can any of the company-specific risk be diversified away by investing in both Invesco KBW 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 Invesco KBW and Invesco SP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Invesco KBW Bank and Invesco SP SmallCap, you can compare the effects of market volatilities on Invesco KBW 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 Invesco KBW with a short position of Invesco SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco KBW and Invesco SP.
Diversification Opportunities for Invesco KBW and Invesco SP
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Invesco and Invesco is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Invesco KBW Bank 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 Invesco KBW 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 KBW Bank 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 Invesco KBW i.e., Invesco KBW and Invesco SP go up and down completely randomly.
Pair Corralation between Invesco KBW and Invesco SP
Given the investment horizon of 90 days Invesco KBW Bank is expected to generate 1.12 times more return on investment than Invesco SP. However, Invesco KBW is 1.12 times more volatile than Invesco SP SmallCap. It trades about 0.04 of its potential returns per unit of risk. Invesco SP SmallCap is currently generating about 0.03 per unit of risk. If you would invest 5,471 in Invesco KBW Bank on November 2, 2024 and sell it today you would earn a total of 1,639 from holding Invesco KBW Bank or generate 29.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Invesco KBW Bank vs. Invesco SP SmallCap
Performance |
| Timeline |
| Invesco KBW Bank |
| Invesco SP SmallCap |
Invesco KBW and Invesco SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Invesco KBW and Invesco SP
The main advantage of trading using opposite Invesco KBW and Invesco SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco KBW 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.| Invesco KBW vs. Invesco KBW Regional | Invesco KBW vs. SPDR SP Bank | Invesco KBW vs. SPDR SP Regional | Invesco KBW vs. iShares Regional Banks |
| Invesco SP vs. Invesco SP SmallCap | Invesco SP vs. Invesco SP SmallCap | Invesco SP vs. Invesco SP SmallCap | Invesco SP vs. Invesco SP SmallCap |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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