Correlation Between Power Financial and Invesco SP
Can any of the company-specific risk be diversified away by investing in both Power Financial 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 Power Financial and Invesco SP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Power Financial Corp and Invesco SP 500, you can compare the effects of market volatilities on Power Financial 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 Power Financial with a short position of Invesco SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Power Financial and Invesco SP.
Diversification Opportunities for Power Financial and Invesco SP
-0.19 | Correlation Coefficient |
Good diversification
The 3 months correlation between Power and Invesco is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Power Financial Corp and Invesco SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco SP 500 and Power Financial 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 Power Financial Corp 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 500 has no effect on the direction of Power Financial i.e., Power Financial and Invesco SP go up and down completely randomly.
Pair Corralation between Power Financial and Invesco SP
Assuming the 90 days trading horizon Power Financial Corp is expected to under-perform the Invesco SP. But the preferred stock apears to be less risky and, when comparing its historical volatility, Power Financial Corp is 1.11 times less risky than Invesco SP. The preferred stock trades about -0.2 of its potential returns per unit of risk. The Invesco SP 500 is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 2,606 in Invesco SP 500 on August 29, 2024 and sell it today you would earn a total of 43.00 from holding Invesco SP 500 or generate 1.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Power Financial Corp vs. Invesco SP 500
Performance |
| Timeline |
| Power Financial Corp |
| Invesco SP 500 |
Power Financial and Invesco SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Power Financial and Invesco SP
The main advantage of trading using opposite Power Financial and Invesco SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Power Financial 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.| Power Financial vs. Forstrong Global Income | Power Financial vs. BMO Aggregate Bond | Power Financial vs. Terreno Resources Corp | Power Financial vs. iShares Canadian HYBrid |
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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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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