Correlation Between Vanguard Total and Invesco QQQ

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Can any of the company-specific risk be diversified away by investing in both Vanguard Total and Invesco QQQ 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 Total and Invesco QQQ into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Total Bond and Invesco QQQ Trust, you can compare the effects of market volatilities on Vanguard Total and Invesco QQQ 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 Total with a short position of Invesco QQQ. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Total and Invesco QQQ.

Diversification Opportunities for Vanguard Total and Invesco QQQ

-0.41
  Correlation Coefficient

Very good diversification

The 3 months correlation between Vanguard and Invesco is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Bond and Invesco QQQ Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco QQQ Trust and Vanguard Total 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 Total Bond are associated (or correlated) with Invesco QQQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco QQQ Trust has no effect on the direction of Vanguard Total i.e., Vanguard Total and Invesco QQQ go up and down completely randomly.

Pair Corralation between Vanguard Total and Invesco QQQ

Considering the 90-day investment horizon Vanguard Total is expected to generate 34.41 times less return on investment than Invesco QQQ. But when comparing it to its historical volatility, Vanguard Total Bond is 2.39 times less risky than Invesco QQQ. It trades about 0.01 of its potential returns per unit of risk. Invesco QQQ Trust is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  31,695  in Invesco QQQ Trust on December 30, 2023 and sell it today you would earn a total of  12,706  from holding Invesco QQQ Trust or generate 40.09% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Vanguard Total Bond  vs.  Invesco QQQ Trust

 Performance 
       Timeline  
Vanguard Total Bond 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Vanguard Total Bond has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Vanguard Total is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.
Invesco QQQ Trust 

Risk-Adjusted Performance

13 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Invesco QQQ Trust are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, Invesco QQQ may actually be approaching a critical reversion point that can send shares even higher in April 2024.

Vanguard Total and Invesco QQQ Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Vanguard Total and Invesco QQQ

The main advantage of trading using opposite Vanguard Total and Invesco QQQ positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Total position performs unexpectedly, Invesco QQQ 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 QQQ will offset losses from the drop in Invesco QQQ's long position.
The idea behind Vanguard Total Bond and Invesco QQQ 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.

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