Correlation Between Invesco NASDAQ and Sterling Capital
Can any of the company-specific risk be diversified away by investing in both Invesco NASDAQ and Sterling Capital 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 NASDAQ and Sterling Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Invesco NASDAQ 100 and Sterling Capital Focus, you can compare the effects of market volatilities on Invesco NASDAQ and Sterling Capital 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 NASDAQ with a short position of Sterling Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco NASDAQ and Sterling Capital.
Diversification Opportunities for Invesco NASDAQ and Sterling Capital
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Invesco and Sterling is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Invesco NASDAQ 100 and Sterling Capital Focus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sterling Capital Focus and Invesco NASDAQ 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 NASDAQ 100 are associated (or correlated) with Sterling Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sterling Capital Focus has no effect on the direction of Invesco NASDAQ i.e., Invesco NASDAQ and Sterling Capital go up and down completely randomly.
Pair Corralation between Invesco NASDAQ and Sterling Capital
Given the investment horizon of 90 days Invesco NASDAQ is expected to generate 4.26 times less return on investment than Sterling Capital. But when comparing it to its historical volatility, Invesco NASDAQ 100 is 1.15 times less risky than Sterling Capital. It trades about 0.08 of its potential returns per unit of risk. Sterling Capital Focus is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 2,877 in Sterling Capital Focus on August 31, 2024 and sell it today you would earn a total of 240.00 from holding Sterling Capital Focus or generate 8.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Invesco NASDAQ 100 vs. Sterling Capital Focus
Performance |
| Timeline |
| Invesco NASDAQ 100 |
| Sterling Capital Focus |
Invesco NASDAQ and Sterling Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Invesco NASDAQ and Sterling Capital
The main advantage of trading using opposite Invesco NASDAQ and Sterling Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco NASDAQ position performs unexpectedly, Sterling Capital 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 Sterling Capital will offset losses from the drop in Sterling Capital's long position.| Invesco NASDAQ vs. Invesco NASDAQ Next | Invesco NASDAQ vs. SPDR Portfolio SP | Invesco NASDAQ vs. SPDR Portfolio SP | Invesco NASDAQ vs. Schwab Dividend Equity |
| Sterling Capital vs. Absolute Core Strategy | Sterling Capital vs. iShares ESG Advanced | Sterling Capital vs. PIMCO RAFI Dynamic | Sterling Capital vs. HCM Defender 100 |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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