Correlation Between Invesco Total and PGIM ETF

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

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

Diversification Opportunities for Invesco Total and PGIM ETF

1.0

Correlation Coefficient

Invesco Total  PGIM ETF

No risk reduction

The 3 months correlation between Invesco and PGIM is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Total Return and PGIM ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PGIM ETF Trust and Invesco Total 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 Total Return are associated (or correlated) with PGIM ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PGIM ETF Trust has no effect on the direction of Invesco Total i.e., Invesco Total and PGIM ETF go up and down completely randomly.

Pair Corralation between Invesco Total and PGIM ETF

Considering the 90-day investment horizon Invesco Total Return is expected to generate 0.92 times more return on investment than PGIM ETF. However, Invesco Total Return is 1.09 times less risky than PGIM ETF. It trades about -0.02 of its potential returns per unit of risk. PGIM ETF Trust is currently generating about -0.02 per unit of risk. If you would invest  4,748  in Invesco Total Return on September 3, 2024 and sell it today you would lose (15.00) from holding Invesco Total Return or give up 0.32% of portfolio value over 90 days.

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

Invesco Total Return  vs.  PGIM ETF Trust

Invesco Total Return

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco Total Return has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Invesco Total is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

PGIM ETF Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PGIM ETF Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, PGIM ETF is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Invesco Total and PGIM ETF

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

The idea behind Invesco Total Return and PGIM ETF Trust 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.