Correlation Between Fidelity Covington and Invesco Exchange

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

By analyzing existing cross correlation between Fidelity Covington Trust and Invesco Exchange Traded, you can compare the effects of market volatilities on Fidelity Covington and Invesco Exchange 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 Fidelity Covington with a short position of Invesco Exchange. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Covington and Invesco Exchange.

Diversification Opportunities for Fidelity Covington and Invesco Exchange

0.58

Correlation Coefficient

Fidelity Covington  Invesco Exchange

Very weak diversification

The 3 months correlation between Fidelity and Invesco is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Covington Trust and Invesco Exchange Traded in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Exchange Traded and Fidelity Covington 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 Fidelity Covington Trust are associated (or correlated) with Invesco Exchange. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Exchange Traded has no effect on the direction of Fidelity Covington i.e., Fidelity Covington and Invesco Exchange go up and down completely randomly.

Pair Corralation between Fidelity Covington and Invesco Exchange

Given the investment horizon of 90 days Fidelity Covington Trust is expected to generate 1.13 times more return on investment than Invesco Exchange. However, Fidelity Covington is 1.13 times more volatile than Invesco Exchange Traded. It trades about 0.03 of its potential returns per unit of risk. Invesco Exchange Traded is currently generating about -0.04 per unit of risk. If you would invest  2,533  in Fidelity Covington Trust on September 27, 2024 and sell it today you would earn a total of  15.00  from holding Fidelity Covington Trust or generate 0.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	37.5%
Values	Daily Returns

Fidelity Covington Trust  vs.  Invesco Exchange Traded

Fidelity Covington Trust

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Covington Trust are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Fidelity Covington is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Invesco Exchange Traded

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco Exchange Traded has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Invesco Exchange is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Fidelity Covington and Invesco Exchange

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

The idea behind Fidelity Covington Trust and Invesco Exchange Traded 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.