Correlation Between Invesco BulletShares and Vanguard Total

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

By analyzing existing cross correlation between Invesco BulletShares 2027 and Vanguard Total Stock, you can compare the effects of market volatilities on Invesco BulletShares and Vanguard Total 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 BulletShares with a short position of Vanguard Total. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco BulletShares and Vanguard Total.

Diversification Opportunities for Invesco BulletShares and Vanguard Total

0.14

Correlation Coefficient

Invesco BulletShares  Vanguard Total

Average diversification

The 3 months correlation between Invesco and Vanguard is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Invesco BulletShares 2027 and Vanguard Total Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Total Stock and Invesco BulletShares 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 BulletShares 2027 are associated (or correlated) with Vanguard Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Total Stock has no effect on the direction of Invesco BulletShares i.e., Invesco BulletShares and Vanguard Total go up and down completely randomly.

Pair Corralation between Invesco BulletShares and Vanguard Total

Given the investment horizon of 90 days Invesco BulletShares 2027 is expected to under-perform the Vanguard Total. But the etf apears to be less risky and, when comparing its historical volatility, Invesco BulletShares 2027 is 5.98 times less risky than Vanguard Total. The etf trades about -0.01 of its potential returns per unit of risk. The Vanguard Total Stock is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  24,317  in Vanguard Total Stock on February 4, 2024 and sell it today you would earn a total of  1,036  from holding Vanguard Total Stock or generate 4.26% return on investment over 90 days.

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

Invesco BulletShares 2027  vs.  Vanguard Total Stock

Invesco BulletShares 2027

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco BulletShares 2027 has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable primary indicators, Invesco BulletShares is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Vanguard Total Stock

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Total Stock are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Vanguard Total is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Invesco BulletShares and Vanguard Total

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

The idea behind Invesco BulletShares 2027 and Vanguard Total Stock 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.