Correlation Between Invesco Variable and VanEck ETF

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

By analyzing existing cross correlation between Invesco Variable Rate and VanEck ETF Trust, you can compare the effects of market volatilities on Invesco Variable and VanEck ETF 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 Variable with a short position of VanEck ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco Variable and VanEck ETF.

Diversification Opportunities for Invesco Variable and VanEck ETF

0.99

Correlation Coefficient

Invesco Variable  VanEck ETF

No risk reduction

The 3 months correlation between Invesco and VanEck is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Variable Rate and VanEck ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck ETF Trust and Invesco Variable 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 Variable Rate are associated (or correlated) with VanEck ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck ETF Trust has no effect on the direction of Invesco Variable i.e., Invesco Variable and VanEck ETF go up and down completely randomly.

Pair Corralation between Invesco Variable and VanEck ETF

Given the investment horizon of 90 days Invesco Variable is expected to generate 1.23 times less return on investment than VanEck ETF. But when comparing it to its historical volatility, Invesco Variable Rate is 1.69 times less risky than VanEck ETF. It trades about 0.58 of its potential returns per unit of risk. VanEck ETF Trust is currently generating about 0.42 of returns per unit of risk over similar time horizon. If you would invest  5,221  in VanEck ETF Trust on September 2, 2024 and sell it today you would earn a total of  94.00  from holding VanEck ETF Trust or generate 1.8% return on investment over 90 days.

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

Invesco Variable Rate  vs.  VanEck ETF Trust

Invesco Variable Rate

Risk-Adjusted Performance

45 of 100

Excellent

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Variable Rate are ranked lower than 45 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable forward indicators, Invesco Variable is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

VanEck ETF Trust

Risk-Adjusted Performance

33 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck ETF Trust are ranked lower than 33 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, VanEck ETF is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Invesco Variable and VanEck ETF

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

The idea behind Invesco Variable Rate and VanEck ETF Trust 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 Stocks Directory module to find actively traded stocks across global markets.