Correlation Between Binance Coin and Invesco SP

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

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

Diversification Opportunities for Binance Coin and Invesco SP

0.85

Correlation Coefficient

Binance Coin  Invesco SP

Very poor diversification

The 3 months correlation between Binance and Invesco is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Binance Coin 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 Binance Coin 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 Binance Coin 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 Binance Coin i.e., Binance Coin and Invesco SP go up and down completely randomly.

Pair Corralation between Binance Coin and Invesco SP

Assuming the 90 days trading horizon Binance Coin is expected to generate 7.05 times more return on investment than Invesco SP. However, Binance Coin is 7.05 times more volatile than Invesco SP 500. It trades about 0.18 of its potential returns per unit of risk. Invesco SP 500 is currently generating about 0.02 per unit of risk. If you would invest  41,119  in Binance Coin on January 31, 2024 and sell it today you would earn a total of  17,521  from holding Binance Coin or generate 42.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	97.62%
Values	Daily Returns

Binance Coin  vs.  Invesco SP 500

Binance Coin

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Binance Coin are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental drivers, Binance Coin exhibited solid returns over the last few months and may actually be approaching a breakup point.

Invesco SP 500

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco SP 500 are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical indicators, Invesco SP may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Binance Coin and Invesco SP

The main advantage of trading using opposite Binance Coin and Invesco SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Binance Coin 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 Binance Coin 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.