Correlation Between Vanguard Mega and Invesco SP

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

By analyzing existing cross correlation between Vanguard Mega Cap and Invesco SP 500, you can compare the effects of market volatilities on Vanguard Mega and Invesco SP 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 Vanguard Mega with a short position of Invesco SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Mega and Invesco SP.

Diversification Opportunities for Vanguard Mega and Invesco SP

0.86

Correlation Coefficient

Vanguard Mega  Invesco SP

Very poor diversification

The 3 months correlation between Vanguard and Invesco is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Mega Cap and Invesco SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco SP 500 and Vanguard Mega 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 Vanguard Mega Cap are associated (or correlated) with Invesco SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco SP 500 has no effect on the direction of Vanguard Mega i.e., Vanguard Mega and Invesco SP go up and down completely randomly.

Pair Corralation between Vanguard Mega and Invesco SP

Considering the 90-day investment horizon Vanguard Mega Cap is expected to generate 0.96 times more return on investment than Invesco SP. However, Vanguard Mega Cap is 1.05 times less risky than Invesco SP. It trades about -0.05 of its potential returns per unit of risk. Invesco SP 500 is currently generating about -0.15 per unit of risk. If you would invest  28,553  in Vanguard Mega Cap on February 5, 2024 and sell it today you would lose (397.00) from holding Vanguard Mega Cap or give up 1.39% of portfolio value over 90 days.

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

Vanguard Mega Cap  vs.  Invesco SP 500

Vanguard Mega Cap

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Mega Cap are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent technical and fundamental indicators, Vanguard Mega is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Invesco SP 500

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco SP 500 are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Invesco SP is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Vanguard Mega and Invesco SP

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

The idea behind Vanguard Mega Cap and Invesco SP 500 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 Stocks Directory module to find actively traded stocks across global markets.