Correlation Between Invesco WilderHill and Vanguard Russell

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

By analyzing existing cross correlation between Invesco WilderHill Clean and Vanguard Russell 2000, you can compare the effects of market volatilities on Invesco WilderHill and Vanguard Russell 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 WilderHill with a short position of Vanguard Russell. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco WilderHill and Vanguard Russell.

Diversification Opportunities for Invesco WilderHill and Vanguard Russell

0.67

Correlation Coefficient

Invesco WilderHill  Vanguard Russell

Poor diversification

The 3 months correlation between Invesco and Vanguard is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Invesco WilderHill Clean and Vanguard Russell 2000 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Russell 2000 and Invesco WilderHill 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 WilderHill Clean are associated (or correlated) with Vanguard Russell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Russell 2000 has no effect on the direction of Invesco WilderHill i.e., Invesco WilderHill and Vanguard Russell go up and down completely randomly.

Pair Corralation between Invesco WilderHill and Vanguard Russell

Considering the 90-day investment horizon Invesco WilderHill Clean is expected to generate 1.73 times more return on investment than Vanguard Russell. However, Invesco WilderHill is 1.73 times more volatile than Vanguard Russell 2000. It trades about 0.13 of its potential returns per unit of risk. Vanguard Russell 2000 is currently generating about 0.19 per unit of risk. If you would invest  1,833  in Invesco WilderHill Clean on September 2, 2024 and sell it today you would earn a total of  331.00  from holding Invesco WilderHill Clean or generate 18.06% return on investment over 90 days.

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

Invesco WilderHill Clean  vs.  Vanguard Russell 2000

Invesco WilderHill Clean

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco WilderHill Clean are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating fundamental drivers, Invesco WilderHill showed solid returns over the last few months and may actually be approaching a breakup point.

Vanguard Russell 2000

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Russell 2000 are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting basic indicators, Vanguard Russell reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Invesco WilderHill and Vanguard Russell

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

The idea behind Invesco WilderHill Clean and Vanguard Russell 2000 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 Global Correlations module to find global opportunities by holding instruments from different markets.