Correlation Between Invesco SP and ALPS Sector

Can any of the company-specific risk be diversified away by investing in both Invesco SP and ALPS Sector 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 ALPS Sector 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 ALPS Sector Dividend, you can compare the effects of market volatilities on Invesco SP and ALPS Sector 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 ALPS Sector. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco SP and ALPS Sector.

Diversification Opportunities for Invesco SP and ALPS Sector

0.92

Correlation Coefficient

Invesco SP  ALPS Sector

Almost no diversification

The 3 months correlation between Invesco and ALPS is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Invesco SP Ultra and ALPS Sector Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALPS Sector Dividend 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 ALPS Sector. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALPS Sector Dividend has no effect on the direction of Invesco SP i.e., Invesco SP and ALPS Sector go up and down completely randomly.

Pair Corralation between Invesco SP and ALPS Sector

Given the investment horizon of 90 days Invesco SP Ultra is expected to generate 1.12 times more return on investment than ALPS Sector. However, Invesco SP is 1.12 times more volatile than ALPS Sector Dividend. It trades about 0.14 of its potential returns per unit of risk. ALPS Sector Dividend is currently generating about 0.15 per unit of risk. If you would invest  4,948  in Invesco SP Ultra on September 2, 2024 and sell it today you would earn a total of  331.00  from holding Invesco SP Ultra or generate 6.69% return on investment over 90 days.

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

Invesco SP Ultra  vs.  ALPS Sector Dividend

Invesco SP Ultra

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco SP Ultra are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating forward indicators, Invesco SP may actually be approaching a critical reversion point that can send shares even higher in January 2025.

ALPS Sector Dividend

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ALPS Sector Dividend are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, ALPS Sector is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Invesco SP and ALPS Sector

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

The idea behind Invesco SP Ultra and ALPS Sector Dividend 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.