Correlation Between Vanguard Russell and Invesco SP

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

By analyzing existing cross correlation between Vanguard Russell 1000 and Invesco SP 500, you can compare the effects of market volatilities on Vanguard Russell 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 Vanguard Russell with a short position of Invesco SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Russell and Invesco SP.

Diversification Opportunities for Vanguard Russell and Invesco SP

0.68

Correlation Coefficient

Vanguard Russell  Invesco SP

Poor diversification

The 3 months correlation between Vanguard and Invesco is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Russell 1000 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 Vanguard Russell 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 Vanguard Russell 1000 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 Vanguard Russell i.e., Vanguard Russell and Invesco SP go up and down completely randomly.

Pair Corralation between Vanguard Russell and Invesco SP

Assuming the 90 days horizon Vanguard Russell 1000 is expected to generate 1.34 times more return on investment than Invesco SP. However, Vanguard Russell is 1.34 times more volatile than Invesco SP 500. It trades about 0.15 of its potential returns per unit of risk. Invesco SP 500 is currently generating about -0.4 per unit of risk. If you would invest  78,090  in Vanguard Russell 1000 on September 24, 2024 and sell it today you would earn a total of  2,590  from holding Vanguard Russell 1000 or generate 3.32% return on investment over 90 days.

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

Vanguard Russell 1000  vs.  Invesco SP 500

Vanguard Russell 1000

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Russell 1000 are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Vanguard Russell may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Invesco SP 500

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco SP 500 are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable essential indicators, Invesco SP is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Vanguard Russell and Invesco SP

The main advantage of trading using opposite Vanguard Russell and Invesco SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Russell 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 Vanguard Russell 1000 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.