Correlation Between Vanguard Growth and Invesco DWA

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

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

Diversification Opportunities for Vanguard Growth and Invesco DWA

0.97

Correlation Coefficient

Vanguard Growth  Invesco DWA

Almost no diversification

The 3 months correlation between Vanguard and Invesco is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Growth Index and Invesco DWA Momentum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco DWA Momentum and Vanguard Growth 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 Growth Index are associated (or correlated) with Invesco DWA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco DWA Momentum has no effect on the direction of Vanguard Growth i.e., Vanguard Growth and Invesco DWA go up and down completely randomly.

Pair Corralation between Vanguard Growth and Invesco DWA

Considering the 90-day investment horizon Vanguard Growth is expected to generate 1.51 times less return on investment than Invesco DWA. But when comparing it to its historical volatility, Vanguard Growth Index is 1.04 times less risky than Invesco DWA. It trades about 0.2 of its potential returns per unit of risk. Invesco DWA Momentum is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  9,775  in Invesco DWA Momentum on September 1, 2024 and sell it today you would earn a total of  1,899  from holding Invesco DWA Momentum or generate 19.43% return on investment over 90 days.

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

Vanguard Growth Index  vs.  Invesco DWA Momentum

Vanguard Growth Index

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Growth Index are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, Vanguard Growth may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Invesco DWA Momentum

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco DWA Momentum are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental indicators, Invesco DWA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vanguard Growth and Invesco DWA

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

The idea behind Vanguard Growth Index and Invesco DWA Momentum 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 Commodity Directory module to find actively traded commodities issued by global exchanges.