Correlation Between Invesco SP and ETF Series
Can any of the company-specific risk be diversified away by investing in both Invesco SP and ETF Series 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 SP and ETF Series into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Invesco SP 500 and ETF Series Solutions, you can compare the effects of market volatilities on Invesco SP and ETF Series 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 SP with a short position of ETF Series. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco SP and ETF Series.
Diversification Opportunities for Invesco SP and ETF Series
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Invesco and ETF is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Invesco SP 500 and ETF Series Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETF Series Solutions and Invesco SP 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 SP 500 are associated (or correlated) with ETF Series. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETF Series Solutions has no effect on the direction of Invesco SP i.e., Invesco SP and ETF Series go up and down completely randomly.
Pair Corralation between Invesco SP and ETF Series
Given the investment horizon of 90 days Invesco SP is expected to generate 8.61 times less return on investment than ETF Series. But when comparing it to its historical volatility, Invesco SP 500 is 1.16 times less risky than ETF Series. It trades about 0.01 of its potential returns per unit of risk. ETF Series Solutions is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 3,339 in ETF Series Solutions on November 1, 2024 and sell it today you would earn a total of 152.00 from holding ETF Series Solutions or generate 4.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Invesco SP 500 vs. ETF Series Solutions
Performance |
| Timeline |
| Invesco SP 500 |
| ETF Series Solutions |
Invesco SP and ETF Series Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Invesco SP and ETF Series
The main advantage of trading using opposite Invesco SP and ETF Series positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco SP position performs unexpectedly, ETF Series 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 ETF Series will offset losses from the drop in ETF Series' long position.| Invesco SP vs. Invesco DWA Emerging | Invesco SP vs. First Trust LongShort | Invesco SP vs. Amplify BlackSwan Growth | Invesco SP vs. Invesco SP 500 |
| ETF Series vs. FT Vest Equity | ETF Series vs. Northern Lights | ETF Series vs. Dimensional International High | ETF Series vs. First Trust Exchange Traded |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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