Correlation Between SP 500 and Invesco SP

Can any of the company-specific risk be diversified away by investing in both SP 500 and Invesco SP 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 SP 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 SP 500, you can compare the effects of market volatilities on SP 500 and Invesco SP 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 SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of SP 500 and Invesco SP.

Diversification Opportunities for SP 500 and Invesco SP

-0.77

Correlation Coefficient

SP 500  Invesco SP

Pay attention - limited upside

The 3 months correlation between VILX and Invesco is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding SP 500 VIX and Invesco SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco SP 500 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 SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco SP 500 has no effect on the direction of SP 500 i.e., SP 500 and Invesco SP go up and down completely randomly.

Pair Corralation between SP 500 and Invesco SP

Assuming the 90 days trading horizon SP 500 VIX is expected to generate 118.25 times more return on investment than Invesco SP. However, SP 500 is 118.25 times more volatile than Invesco SP 500. It trades about 0.09 of its potential returns per unit of risk. Invesco SP 500 is currently generating about 0.12 per unit of risk. If you would invest  62.00  in SP 500 VIX on September 14, 2024 and sell it today you would earn a total of  163,316  from holding SP 500 VIX or generate 263412.9% return on investment over 90 days.

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

SP 500 VIX  vs.  Invesco SP 500

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 SP 500

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco SP 500 are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Invesco SP is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with SP 500 and Invesco SP

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

The idea behind SP 500 VIX and Invesco SP 500 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.