Correlation Between Invesco SP and Dimensional ETF
Can any of the company-specific risk be diversified away by investing in both Invesco SP and Dimensional ETF 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 Dimensional ETF 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 Dimensional ETF Trust, you can compare the effects of market volatilities on Invesco SP and Dimensional ETF 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 Dimensional ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco SP and Dimensional ETF.
Diversification Opportunities for Invesco SP and Dimensional ETF
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Invesco and Dimensional is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Invesco SP SmallCap and Dimensional ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimensional ETF Trust 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 Dimensional ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimensional ETF Trust has no effect on the direction of Invesco SP i.e., Invesco SP and Dimensional ETF go up and down completely randomly.
Pair Corralation between Invesco SP and Dimensional ETF
Considering the 90-day investment horizon Invesco SP is expected to generate 1.22 times less return on investment than Dimensional ETF. But when comparing it to its historical volatility, Invesco SP SmallCap is 1.06 times less risky than Dimensional ETF. It trades about 0.19 of its potential returns per unit of risk. Dimensional ETF Trust is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 3,084 in Dimensional ETF Trust on August 27, 2024 and sell it today you would earn a total of 247.00 from holding Dimensional ETF Trust or generate 8.01% 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. Dimensional ETF Trust
Performance |
| Timeline |
| Invesco SP SmallCap |
| Dimensional ETF Trust |
Invesco SP and Dimensional ETF Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Invesco SP and Dimensional ETF
The main advantage of trading using opposite Invesco SP and Dimensional ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco SP position performs unexpectedly, Dimensional ETF 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 Dimensional ETF will offset losses from the drop in Dimensional ETF's long position.| Invesco SP vs. Invesco SP MidCap | Invesco SP vs. Invesco SP 500 | Invesco SP vs. WisdomTree SmallCap Earnings | Invesco SP 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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