Correlation Between Invesco SP and AdvisorShares Hotel

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

By analyzing existing cross correlation between Invesco SP 500 and AdvisorShares Hotel ETF, you can compare the effects of market volatilities on Invesco SP and AdvisorShares Hotel 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 AdvisorShares Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco SP and AdvisorShares Hotel.

Diversification Opportunities for Invesco SP and AdvisorShares Hotel

-0.63

Correlation Coefficient

Invesco SP  AdvisorShares Hotel

Excellent diversification

The 3 months correlation between Invesco and AdvisorShares is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Invesco SP 500 and AdvisorShares Hotel ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AdvisorShares Hotel 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 500 are associated (or correlated) with AdvisorShares Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AdvisorShares Hotel ETF has no effect on the direction of Invesco SP i.e., Invesco SP and AdvisorShares Hotel go up and down completely randomly.

Pair Corralation between Invesco SP and AdvisorShares Hotel

Considering the 90-day investment horizon Invesco SP 500 is expected to under-perform the AdvisorShares Hotel. But the etf apears to be less risky and, when comparing its historical volatility, Invesco SP 500 is 1.36 times less risky than AdvisorShares Hotel. The etf trades about -0.22 of its potential returns per unit of risk. The AdvisorShares Hotel ETF is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  2,968  in AdvisorShares Hotel ETF on September 29, 2024 and sell it today you would earn a total of  351.00  from holding AdvisorShares Hotel ETF or generate 11.83% return on investment over 90 days.

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

Invesco SP 500  vs.  AdvisorShares Hotel ETF

Invesco SP 500

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Etf's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

AdvisorShares Hotel ETF

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AdvisorShares Hotel ETF are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent fundamental indicators, AdvisorShares Hotel may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Invesco SP and AdvisorShares Hotel

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

The idea behind Invesco SP 500 and AdvisorShares Hotel 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.