Correlation Between INVESCO MARKETS and Vanguard Germany

Can any of the company-specific risk be diversified away by investing in both INVESCO MARKETS and Vanguard Germany 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 MARKETS and Vanguard Germany into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between INVESCO MARKETS II and Vanguard Germany All, you can compare the effects of market volatilities on INVESCO MARKETS and Vanguard Germany 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 MARKETS with a short position of Vanguard Germany. Check out your portfolio center. Please also check ongoing floating volatility patterns of INVESCO MARKETS and Vanguard Germany.

Diversification Opportunities for INVESCO MARKETS and Vanguard Germany

0.89

Correlation Coefficient

INVESCO MARKETS  Vanguard Germany

Very poor diversification

The 3 months correlation between INVESCO and Vanguard is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding INVESCO MARKETS II and Vanguard Germany All in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Germany All and INVESCO MARKETS 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 MARKETS II are associated (or correlated) with Vanguard Germany. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Germany All has no effect on the direction of INVESCO MARKETS i.e., INVESCO MARKETS and Vanguard Germany go up and down completely randomly.

Pair Corralation between INVESCO MARKETS and Vanguard Germany

Assuming the 90 days trading horizon INVESCO MARKETS II is expected to generate 0.81 times more return on investment than Vanguard Germany. However, INVESCO MARKETS II is 1.23 times less risky than Vanguard Germany. It trades about 0.25 of its potential returns per unit of risk. Vanguard Germany All is currently generating about 0.16 per unit of risk. If you would invest  565,700  in INVESCO MARKETS II on April 24, 2025 and sell it today you would earn a total of  65,500  from holding INVESCO MARKETS II or generate 11.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.41%
Values	Daily Returns

INVESCO MARKETS II  vs.  Vanguard Germany All

INVESCO MARKETS II

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in INVESCO MARKETS II are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, INVESCO MARKETS may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Vanguard Germany All

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Germany All are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Vanguard Germany may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with INVESCO MARKETS and Vanguard Germany

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

The idea behind INVESCO MARKETS II and Vanguard Germany All 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.