Correlation Between Invesco SP and Invesco KBW
Can any of the company-specific risk be diversified away by investing in both Invesco SP 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 Invesco SP and Invesco KBW into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Invesco SP SmallCap and Invesco KBW Regional, you can compare the effects of market volatilities on Invesco SP 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 Invesco SP with a short position of Invesco KBW. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco SP and Invesco KBW.
Diversification Opportunities for Invesco SP and Invesco KBW
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Invesco and Invesco is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Invesco SP SmallCap and Invesco KBW Regional in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco KBW Regional 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 SmallCap 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 Regional has no effect on the direction of Invesco SP i.e., Invesco SP and Invesco KBW go up and down completely randomly.
Pair Corralation between Invesco SP and Invesco KBW
Given the investment horizon of 90 days Invesco SP is expected to generate 1.62 times less return on investment than Invesco KBW. But when comparing it to its historical volatility, Invesco SP SmallCap is 1.61 times less risky than Invesco KBW. It trades about 0.22 of its potential returns per unit of risk. Invesco KBW Regional is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 5,913 in Invesco KBW Regional on August 28, 2024 and sell it today you would earn a total of 916.00 from holding Invesco KBW Regional or generate 15.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Invesco SP SmallCap vs. Invesco KBW Regional
Performance |
| Timeline |
| Invesco SP SmallCap |
| Invesco KBW Regional |
Invesco SP and Invesco KBW Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Invesco SP and Invesco KBW
The main advantage of trading using opposite Invesco SP and Invesco KBW positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco SP 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.| Invesco SP vs. Invesco SP SmallCap | Invesco SP vs. Invesco SP SmallCap | Invesco SP vs. Invesco SP SmallCap | Invesco SP vs. Invesco SP SmallCap |
| Invesco KBW vs. First Trust NASDAQ | Invesco KBW vs. Invesco KBW Bank | Invesco KBW vs. Invesco KBW Property | Invesco KBW 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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