Correlation Between T Rex and Invesco SP

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

By analyzing existing cross correlation between T Rex 2X Long and Invesco SP 500, you can compare the effects of market volatilities on T Rex 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 T Rex with a short position of Invesco SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of T Rex and Invesco SP.

Diversification Opportunities for T Rex and Invesco SP

0.72

Correlation Coefficient

T Rex  Invesco SP

Poor diversification

The 3 months correlation between NVDX and Invesco is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding T Rex 2X Long 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 T Rex 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 T Rex 2X Long 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 T Rex i.e., T Rex and Invesco SP go up and down completely randomly.

Pair Corralation between T Rex and Invesco SP

Given the investment horizon of 90 days T Rex 2X Long is expected to generate 4.75 times more return on investment than Invesco SP. However, T Rex is 4.75 times more volatile than Invesco SP 500. It trades about 0.09 of its potential returns per unit of risk. Invesco SP 500 is currently generating about 0.22 per unit of risk. If you would invest  1,375  in T Rex 2X Long on September 13, 2024 and sell it today you would earn a total of  325.00  from holding T Rex 2X Long or generate 23.64% return on investment over 90 days.

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

T Rex 2X Long  vs.  Invesco SP 500

T Rex 2X

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in T Rex 2X Long are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, T Rex showed solid returns over the last few months and may actually be approaching a breakup point.

Invesco SP 500

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco SP 500 are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, Invesco SP reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with T Rex and Invesco SP

The main advantage of trading using opposite T Rex and Invesco SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if T Rex 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 T Rex 2X Long 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.