Correlation Between NYSE Composite and Invesco KBW
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Invesco KBW 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 NYSE Composite and Invesco KBW into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Invesco KBW Bank, you can compare the effects of market volatilities on NYSE Composite and Invesco KBW 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 NYSE Composite with a short position of Invesco KBW. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Invesco KBW.
Diversification Opportunities for NYSE Composite and Invesco KBW
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between NYSE and Invesco is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Invesco KBW Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco KBW Bank and NYSE Composite 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 NYSE Composite are associated (or correlated) with Invesco KBW. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco KBW Bank has no effect on the direction of NYSE Composite i.e., NYSE Composite and Invesco KBW go up and down completely randomly.
Pair Corralation between NYSE Composite and Invesco KBW
Assuming the 90 days trading horizon NYSE Composite is expected to generate 5.62 times less return on investment than Invesco KBW. But when comparing it to its historical volatility, NYSE Composite is 3.33 times less risky than Invesco KBW. It trades about 0.14 of its potential returns per unit of risk. Invesco KBW Bank is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 5,825 in Invesco KBW Bank on August 28, 2024 and sell it today you would earn a total of 1,285 from holding Invesco KBW Bank or generate 22.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. Invesco KBW Bank
Performance |
| Timeline |
NYSE Composite and Invesco KBW Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Invesco KBW Bank
Pair trading matchups for Invesco KBW
Pair Trading with NYSE Composite and Invesco KBW
The main advantage of trading using opposite NYSE Composite and Invesco KBW positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Invesco KBW 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 KBW will offset losses from the drop in Invesco KBW's long position.| NYSE Composite vs. Vita Coco | NYSE Composite vs. Franklin Wireless Corp | NYSE Composite vs. Ambev SA ADR | NYSE Composite vs. Toro Co |
| Invesco KBW vs. UBS AG London | Invesco KBW vs. UBS AG London | Invesco KBW vs. ETRACS Quarterly Pay | Invesco KBW vs. ETRACS 2xMonthly Pay |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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