Correlation Between SP 500 and Invesco Solar

Can any of the company-specific risk be diversified away by investing in both SP 500 and Invesco Solar 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 SP 500 and Invesco Solar into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SP 500 VIX and Invesco Solar Energy, you can compare the effects of market volatilities on SP 500 and Invesco Solar 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 SP 500 with a short position of Invesco Solar. Check out your portfolio center. Please also check ongoing floating volatility patterns of SP 500 and Invesco Solar.

Diversification Opportunities for SP 500 and Invesco Solar

0.63

Correlation Coefficient

SP 500  Invesco Solar

Poor diversification

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

Pair Corralation between SP 500 and Invesco Solar

Assuming the 90 days trading horizon SP 500 VIX is expected to under-perform the Invesco Solar. In addition to that, SP 500 is 2.65 times more volatile than Invesco Solar Energy. It trades about -0.08 of its total potential returns per unit of risk. Invesco Solar Energy is currently generating about -0.07 per unit of volatility. If you would invest  2,105  in Invesco Solar Energy on September 14, 2024 and sell it today you would lose (263.00) from holding Invesco Solar Energy or give up 12.49% of portfolio value over 90 days.

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

SP 500 VIX  vs.  Invesco Solar Energy

SP 500 VIX

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SP 500 VIX has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Etf's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the exchange-traded fund private investors.

Invesco Solar Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco Solar Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Etf's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

Pair Trading with SP 500 and Invesco Solar

The main advantage of trading using opposite SP 500 and Invesco Solar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SP 500 position performs unexpectedly, Invesco Solar 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 Invesco Solar will offset losses from the drop in Invesco Solar's long position.

The idea behind SP 500 VIX and Invesco Solar Energy 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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.