Correlation Between Invesco SP and Etho Climate

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

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

Diversification Opportunities for Invesco SP and Etho Climate

0.62

Correlation Coefficient

Invesco SP  Etho Climate

Poor diversification

The 3 months correlation between Invesco and Etho is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Invesco SP MidCap and Etho Climate Leadership in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Etho Climate Leadership and Invesco SP 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 SP MidCap are associated (or correlated) with Etho Climate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Etho Climate Leadership has no effect on the direction of Invesco SP i.e., Invesco SP and Etho Climate go up and down completely randomly.

Pair Corralation between Invesco SP and Etho Climate

Given the investment horizon of 90 days Invesco SP MidCap is expected to generate 1.07 times more return on investment than Etho Climate. However, Invesco SP is 1.07 times more volatile than Etho Climate Leadership. It trades about 0.0 of its potential returns per unit of risk. Etho Climate Leadership is currently generating about -0.07 per unit of risk. If you would invest  11,074  in Invesco SP MidCap on February 3, 2024 and sell it today you would lose (28.00) from holding Invesco SP MidCap or give up 0.25% of portfolio value over 90 days.

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

Invesco SP MidCap  vs.  Etho Climate Leadership

Invesco SP MidCap

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco SP MidCap are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, Invesco SP displayed solid returns over the last few months and may actually be approaching a breakup point.

Etho Climate Leadership

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Etho Climate Leadership are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical indicators, Etho Climate is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Invesco SP and Etho Climate

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

The idea behind Invesco SP MidCap and Etho Climate Leadership 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.

Check out your portfolio center.

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 Global Correlations module to find global opportunities by holding instruments from different markets.