Correlation Between Invesco SP and Dynamic Active

Can any of the company-specific risk be diversified away by investing in both Invesco SP and Dynamic Active 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 Dynamic Active 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 Dynamic Active Global, you can compare the effects of market volatilities on Invesco SP and Dynamic Active 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 Dynamic Active. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco SP and Dynamic Active.

Diversification Opportunities for Invesco SP and Dynamic Active

0.88

Correlation Coefficient

Invesco SP  Dynamic Active

Very poor diversification

The 3 months correlation between Invesco and Dynamic is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Invesco SP 500 and Dynamic Active Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dynamic Active Global 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 Dynamic Active. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dynamic Active Global has no effect on the direction of Invesco SP i.e., Invesco SP and Dynamic Active go up and down completely randomly.

Pair Corralation between Invesco SP and Dynamic Active

Assuming the 90 days trading horizon Invesco SP 500 is expected to generate 1.26 times more return on investment than Dynamic Active. However, Invesco SP is 1.26 times more volatile than Dynamic Active Global. It trades about 0.24 of its potential returns per unit of risk. Dynamic Active Global is currently generating about 0.18 per unit of risk. If you would invest  2,498  in Invesco SP 500 on April 23, 2025 and sell it today you would earn a total of  292.00  from holding Invesco SP 500 or generate 11.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Invesco SP 500  vs.  Dynamic Active Global

Invesco SP 500

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco SP 500 are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Invesco SP may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Dynamic Active Global

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dynamic Active Global are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Dynamic Active may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Invesco SP and Dynamic Active

The main advantage of trading using opposite Invesco SP and Dynamic Active positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco SP position performs unexpectedly, Dynamic Active 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 Dynamic Active will offset losses from the drop in Dynamic Active's long position.

The idea behind Invesco SP 500 and Dynamic Active Global pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.