Correlation Between Invesco SP and TD Index

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

By analyzing existing cross correlation between Invesco SP International and TD Index Fund E, you can compare the effects of market volatilities on Invesco SP and TD Index 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 TD Index. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco SP and TD Index.

Diversification Opportunities for Invesco SP and TD Index

-0.79

Correlation Coefficient

Invesco SP  TD Index

Pay attention - limited upside

The 3 months correlation between Invesco and TDB902 is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Invesco SP International and TD Index Fund E in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TD Index Fund 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 International are associated (or correlated) with TD Index. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TD Index Fund has no effect on the direction of Invesco SP i.e., Invesco SP and TD Index go up and down completely randomly.

Pair Corralation between Invesco SP and TD Index

Assuming the 90 days trading horizon Invesco SP International is expected to under-perform the TD Index. But the fund apears to be less risky and, when comparing its historical volatility, Invesco SP International is 9.0 times less risky than TD Index. The fund trades about -0.11 of its potential returns per unit of risk. The TD Index Fund E is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  13,431  in TD Index Fund E on September 13, 2024 and sell it today you would earn a total of  1,708  from holding TD Index Fund E or generate 12.72% return on investment over 90 days.

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

Invesco SP International  vs.  TD Index Fund E

Invesco SP International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco SP International has generated negative risk-adjusted returns adding no value to fund investors. Despite somewhat strong fundamental indicators, Invesco SP is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

TD Index Fund

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TD Index Fund E are ranked lower than 21 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat weak fundamental drivers, TD Index may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Invesco SP and TD Index

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

The idea behind Invesco SP International and TD Index Fund E 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.

Check out your portfolio center.

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.