Correlation Between Invesco SP and Franklin Templeton

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

By analyzing existing cross correlation between Invesco SP Ultra and Franklin Templeton ETF, you can compare the effects of market volatilities on Invesco SP and Franklin Templeton 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 Franklin Templeton. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco SP and Franklin Templeton.

Diversification Opportunities for Invesco SP and Franklin Templeton

-0.08

Correlation Coefficient

Invesco SP  Franklin Templeton

Good diversification

The 3 months correlation between Invesco and Franklin is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Invesco SP Ultra and Franklin Templeton ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Templeton ETF 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 Ultra are associated (or correlated) with Franklin Templeton. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Templeton ETF has no effect on the direction of Invesco SP i.e., Invesco SP and Franklin Templeton go up and down completely randomly.

Pair Corralation between Invesco SP and Franklin Templeton

Given the investment horizon of 90 days Invesco SP Ultra is expected to generate 0.63 times more return on investment than Franklin Templeton. However, Invesco SP Ultra is 1.58 times less risky than Franklin Templeton. It trades about 0.12 of its potential returns per unit of risk. Franklin Templeton ETF is currently generating about 0.04 per unit of risk. If you would invest  4,906  in Invesco SP Ultra on September 5, 2024 and sell it today you would earn a total of  278.00  from holding Invesco SP Ultra or generate 5.67% return on investment over 90 days.

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

Invesco SP Ultra  vs.  Franklin Templeton ETF

Invesco SP Ultra

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco SP Ultra are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable forward indicators, Invesco SP is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Franklin Templeton ETF

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Templeton ETF are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Franklin Templeton is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Invesco SP and Franklin Templeton

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

The idea behind Invesco SP Ultra and Franklin Templeton ETF 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.