Correlation Between Invesco SP and Pacer Small
Can any of the company-specific risk be diversified away by investing in both Invesco SP and Pacer Small 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 Pacer Small 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 Pacer Small Cap, you can compare the effects of market volatilities on Invesco SP and Pacer Small 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 Pacer Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco SP and Pacer Small.
Diversification Opportunities for Invesco SP and Pacer Small
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Invesco and Pacer is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Invesco SP SmallCap and Pacer Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacer Small Cap 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 Pacer Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacer Small Cap has no effect on the direction of Invesco SP i.e., Invesco SP and Pacer Small go up and down completely randomly.
Pair Corralation between Invesco SP and Pacer Small
Given the investment horizon of 90 days Invesco SP SmallCap is expected to generate 1.16 times more return on investment than Pacer Small. However, Invesco SP is 1.16 times more volatile than Pacer Small Cap. It trades about 0.1 of its potential returns per unit of risk. Pacer Small Cap is currently generating about 0.08 per unit of risk. If you would invest 5,469 in Invesco SP SmallCap on August 31, 2024 and sell it today you would earn a total of 514.00 from holding Invesco SP SmallCap or generate 9.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Invesco SP SmallCap vs. Pacer Small Cap
Performance |
| Timeline |
| Invesco SP SmallCap |
| Pacer Small Cap |
Invesco SP and Pacer Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Invesco SP and Pacer Small
The main advantage of trading using opposite Invesco SP and Pacer Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco SP position performs unexpectedly, Pacer Small 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 Pacer Small will offset losses from the drop in Pacer Small's long position.| Invesco SP vs. Invesco SP SmallCap | Invesco SP vs. Invesco SP MidCap | Invesco SP vs. Invesco SP SmallCap | Invesco SP vs. Invesco SP MidCap |
| Pacer Small vs. Pacer Cash Cows | Pacer Small vs. Pacer Global Cash | Pacer Small vs. Pacer Developed Markets | Pacer Small 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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