Correlation Between Upstart HoldingsInc and Invesco Small

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

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

Diversification Opportunities for Upstart HoldingsInc and Invesco Small

-0.65

Correlation Coefficient

Upstart HoldingsInc  Invesco Small

Excellent diversification

The 3 months correlation between Upstart and Invesco is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Upstart HoldingsInc and Invesco Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Small Cap and Upstart HoldingsInc 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 Upstart HoldingsInc are associated (or correlated) with Invesco Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Small Cap has no effect on the direction of Upstart HoldingsInc i.e., Upstart HoldingsInc and Invesco Small go up and down completely randomly.

Pair Corralation between Upstart HoldingsInc and Invesco Small

Given the investment horizon of 90 days Upstart HoldingsInc is expected to under-perform the Invesco Small. In addition to that, Upstart HoldingsInc is 4.13 times more volatile than Invesco Small Cap. It trades about -0.04 of its total potential returns per unit of risk. Invesco Small Cap is currently generating about 0.16 per unit of volatility. If you would invest  2,055  in Invesco Small Cap on January 25, 2024 and sell it today you would earn a total of  128.00  from holding Invesco Small Cap or generate 6.23% return on investment over 90 days.

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

Upstart HoldingsInc  vs.  Invesco Small Cap

Upstart HoldingsInc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Upstart HoldingsInc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in May 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Invesco Small Cap

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Small Cap are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Invesco Small may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Upstart HoldingsInc and Invesco Small

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

The idea behind Upstart HoldingsInc and Invesco Small Cap 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.