Correlation Between Invesco PureBeta and Stone Ridge

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

By analyzing existing cross correlation between Invesco PureBeta 0 5 and Stone Ridge 2052, you can compare the effects of market volatilities on Invesco PureBeta and Stone Ridge 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 PureBeta with a short position of Stone Ridge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco PureBeta and Stone Ridge.

Diversification Opportunities for Invesco PureBeta and Stone Ridge

0.57

Correlation Coefficient

Invesco PureBeta  Stone Ridge

Very weak diversification

The 3 months correlation between Invesco and Stone is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Invesco PureBeta 0 5 and Stone Ridge 2052 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stone Ridge 2052 and Invesco PureBeta 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 PureBeta 0 5 are associated (or correlated) with Stone Ridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stone Ridge 2052 has no effect on the direction of Invesco PureBeta i.e., Invesco PureBeta and Stone Ridge go up and down completely randomly.

Pair Corralation between Invesco PureBeta and Stone Ridge

Given the investment horizon of 90 days Invesco PureBeta 0 5 is expected to generate 0.26 times more return on investment than Stone Ridge. However, Invesco PureBeta 0 5 is 3.89 times less risky than Stone Ridge. It trades about 0.14 of its potential returns per unit of risk. Stone Ridge 2052 is currently generating about -0.13 per unit of risk. If you would invest  2,528  in Invesco PureBeta 0 5 on September 2, 2024 and sell it today you would earn a total of  26.00  from holding Invesco PureBeta 0 5 or generate 1.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	85.94%
Values	Daily Returns

Invesco PureBeta 0 5  vs.  Stone Ridge 2052

Invesco PureBeta 0

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco PureBeta 0 5 are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Invesco PureBeta is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Stone Ridge 2052

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stone Ridge 2052 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Stone Ridge is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Invesco PureBeta and Stone Ridge

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

The idea behind Invesco PureBeta 0 5 and Stone Ridge 2052 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.