Correlation Between Invesco SP and Main Sector
Can any of the company-specific risk be diversified away by investing in both Invesco SP and Main Sector 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 Main Sector 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 Main Sector Rotation, you can compare the effects of market volatilities on Invesco SP and Main Sector 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 Main Sector. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco SP and Main Sector.
Diversification Opportunities for Invesco SP and Main Sector
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Invesco and Main is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Invesco SP 500 and Main Sector Rotation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Main Sector Rotation 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 Main Sector. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Main Sector Rotation has no effect on the direction of Invesco SP i.e., Invesco SP and Main Sector go up and down completely randomly.
Pair Corralation between Invesco SP and Main Sector
Considering the 90-day investment horizon Invesco SP 500 is expected to generate 0.71 times more return on investment than Main Sector. However, Invesco SP 500 is 1.4 times less risky than Main Sector. It trades about 0.25 of its potential returns per unit of risk. Main Sector Rotation is currently generating about 0.17 per unit of risk. If you would invest 17,912 in Invesco SP 500 on August 29, 2024 and sell it today you would earn a total of 811.00 from holding Invesco SP 500 or generate 4.53% 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 500 vs. Main Sector Rotation
Performance |
| Timeline |
| Invesco SP 500 |
| Main Sector Rotation |
Invesco SP and Main Sector Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Invesco SP and Main Sector
The main advantage of trading using opposite Invesco SP and Main Sector positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco SP position performs unexpectedly, Main Sector 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 Main Sector will offset losses from the drop in Main Sector's long position.| Invesco SP vs. iShares Core SP | Invesco SP vs. iShares Russell 1000 | Invesco SP vs. iShares Core SP | Invesco SP vs. iShares SP 500 |
| Main Sector vs. Main Thematic Innovation | Main Sector vs. SPDR SSGA Sector | Main Sector vs. iShares MSCI USA | Main Sector vs. SPDR MSCI USA |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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