Correlation Between Invesco FTSE and Invesco NASDAQ
Can any of the company-specific risk be diversified away by investing in both Invesco FTSE and Invesco NASDAQ 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 FTSE and Invesco NASDAQ into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Invesco FTSE RAFI and Invesco NASDAQ 100, you can compare the effects of market volatilities on Invesco FTSE and Invesco NASDAQ 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 FTSE with a short position of Invesco NASDAQ. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco FTSE and Invesco NASDAQ.
Diversification Opportunities for Invesco FTSE and Invesco NASDAQ
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Invesco and Invesco is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Invesco FTSE RAFI and Invesco NASDAQ 100 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco NASDAQ 100 and Invesco FTSE 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 FTSE RAFI are associated (or correlated) with Invesco NASDAQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco NASDAQ 100 has no effect on the direction of Invesco FTSE i.e., Invesco FTSE and Invesco NASDAQ go up and down completely randomly.
Pair Corralation between Invesco FTSE and Invesco NASDAQ
Assuming the 90 days trading horizon Invesco FTSE is expected to generate 1.26 times less return on investment than Invesco NASDAQ. But when comparing it to its historical volatility, Invesco FTSE RAFI is 1.36 times less risky than Invesco NASDAQ. It trades about 0.08 of its potential returns per unit of risk. Invesco NASDAQ 100 is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 2,533 in Invesco NASDAQ 100 on November 4, 2024 and sell it today you would earn a total of 439.00 from holding Invesco NASDAQ 100 or generate 17.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Invesco FTSE RAFI vs. Invesco NASDAQ 100
Performance |
| Timeline |
| Invesco FTSE RAFI |
| Invesco NASDAQ 100 |
Invesco FTSE and Invesco NASDAQ Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Invesco FTSE and Invesco NASDAQ
The main advantage of trading using opposite Invesco FTSE and Invesco NASDAQ positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco FTSE position performs unexpectedly, Invesco NASDAQ 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 NASDAQ will offset losses from the drop in Invesco NASDAQ's long position.| Invesco FTSE vs. iShares SPTSX 60 | Invesco FTSE vs. iShares Core SP | Invesco FTSE vs. iShares Core SPTSX | Invesco FTSE vs. BMO Aggregate Bond |
| Invesco NASDAQ vs. Invesco SP 500 | Invesco NASDAQ vs. iShares SP Mid Cap | Invesco NASDAQ vs. Vanguard Global Value | Invesco NASDAQ vs. Vanguard Dividend Appreciation |
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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