Correlation Between Invesco SP and Wahed FTSE

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

Diversification Opportunities for Invesco SP and Wahed FTSE

0.81

Correlation Coefficient

Invesco SP  Wahed FTSE

Very poor diversification

The 3 months correlation between Invesco and Wahed is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Invesco SP 500 and Wahed FTSE USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wahed FTSE USA 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 Wahed FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wahed FTSE USA has no effect on the direction of Invesco SP i.e., Invesco SP and Wahed FTSE go up and down completely randomly.

Pair Corralation between Invesco SP and Wahed FTSE

Considering the 90-day investment horizon Invesco SP 500 is expected to generate 0.84 times more return on investment than Wahed FTSE. However, Invesco SP 500 is 1.19 times less risky than Wahed FTSE. It trades about -0.21 of its potential returns per unit of risk. Wahed FTSE USA is currently generating about -0.18 per unit of risk. If you would invest  16,692  in Invesco SP 500 on February 2, 2024 and sell it today you would lose (572.00) from holding Invesco SP 500 or give up 3.43% of portfolio value over 90 days.

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

Invesco SP 500  vs.  Wahed FTSE USA

Invesco SP 500

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco SP 500 are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Invesco SP is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Wahed FTSE USA

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Wahed FTSE USA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Wahed FTSE is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Invesco SP and Wahed FTSE

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

The idea behind Invesco SP 500 and Wahed FTSE USA 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.