Correlation Between Invesco SP and SP 500

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

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Can any of the company-specific risk be diversified away by investing in both Invesco SP and SP 500 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 SP 500 into the same portfolio, which is an essential part of the fundamental portfolio management process.

Diversification Opportunities for Invesco SP and SP 500

0.86
  Correlation Coefficient
Invesco SP 500
SP 500 Growth

Very poor diversification

The 3 months correlation between Invesco and SP 500 is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Invesco SP 500 and SP 500 Growth in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on SP 500 Growth 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 500 are associated (or correlated) with SP 500. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SP 500 Growth has no effect on the direction of Invesco SP i.e., Invesco SP and SP 500 go up and down completely randomly.

Pair Corralation between Invesco SP and SP 500

Given the investment horizon of 90 days Invesco SP 500 is expected to generate 2.23 times more return on investment than SP 500. However, Invesco SP is 2.23 times more volatile than SP 500 Growth. It trades about 0.04 of its potential returns per unit of risk. SP 500 Growth is currently generating about 0.07 per unit of risk. If you would invest  5,979  in Invesco SP 500 on July 24, 2021 and sell it today you would earn a total of  3,242  from holding Invesco SP 500 or generate 54.22% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy98.81%
ValuesDaily Returns

Invesco SP 500  vs.  SP 500 Growth

 Performance (%) 
      Timeline 
Invesco SP 500 
 Invesco Performance
4 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Invesco SP 500 are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Invesco SP is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the insiders.

Invesco Price Channel

SP 500 Growth 
 SP 500 Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in SP 500 Growth are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, SP 500 is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

SP 500 Price Channel

Invesco SP and SP 500 Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Invesco SP and SP 500

The main advantage of trading using opposite Invesco SP and SP 500 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco SP position performs unexpectedly, SP 500 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 SP 500 will offset losses from the drop in SP 500's long position.

Invesco SP 500

Pair trading matchups for Invesco SP

The idea behind Invesco SP 500 and SP 500 Growth 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.

SP 500 Growth

Pair trading matchups for SP 500

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 Analyst Recommendations module to analyst recommendations and target price estimates broken down by several categories.

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