Correlation Between SP 500 and Invesco Solar
Can any of the company-specific risk be diversified away by investing in both SP 500 and Invesco Solar 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 SP 500 and Invesco Solar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SP 500 VIX and Invesco Solar Energy, you can compare the effects of market volatilities on SP 500 and Invesco Solar 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 SP 500 with a short position of Invesco Solar. Check out your portfolio center. Please also check ongoing floating volatility patterns of SP 500 and Invesco Solar.
Diversification Opportunities for SP 500 and Invesco Solar
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between VILX and Invesco is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding SP 500 VIX and Invesco Solar Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Solar Energy and SP 500 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 SP 500 VIX are associated (or correlated) with Invesco Solar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Solar Energy has no effect on the direction of SP 500 i.e., SP 500 and Invesco Solar go up and down completely randomly.
Pair Corralation between SP 500 and Invesco Solar
Assuming the 90 days trading horizon SP 500 VIX is expected to under-perform the Invesco Solar. In addition to that, SP 500 is 3.13 times more volatile than Invesco Solar Energy. It trades about -0.27 of its total potential returns per unit of risk. Invesco Solar Energy is currently generating about -0.16 per unit of volatility. If you would invest 2,159 in Invesco Solar Energy on September 5, 2024 and sell it today you would lose (224.00) from holding Invesco Solar Energy or give up 10.38% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SP 500 VIX vs. Invesco Solar Energy
Performance |
| Timeline |
| SP 500 VIX |
| Invesco Solar Energy |
SP 500 and Invesco Solar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SP 500 and Invesco Solar
The main advantage of trading using opposite SP 500 and Invesco Solar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SP 500 position performs unexpectedly, Invesco Solar 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 Solar will offset losses from the drop in Invesco Solar's long position.| SP 500 vs. GraniteShares 3x Short | SP 500 vs. WisdomTree Natural Gas | SP 500 vs. Leverage Shares 3x | SP 500 vs. WisdomTree Natural Gas |
| Invesco Solar vs. Leverage Shares 3x | Invesco Solar vs. WisdomTree Natural Gas | Invesco Solar vs. SP 500 VIX | Invesco Solar vs. Leverage Shares 3x |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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