Correlation Between Global X and Invesco KBW

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

By analyzing existing cross correlation between Global X SuperIncome and Invesco KBW Premium, you can compare the effects of market volatilities on Global X and Invesco KBW 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 Global X with a short position of Invesco KBW. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global X and Invesco KBW.

Diversification Opportunities for Global X and Invesco KBW

0.7

Correlation Coefficient

Global X  Invesco KBW

Poor diversification

The 3 months correlation between Global and Invesco is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Global X SuperIncome and Invesco KBW Premium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco KBW Premium and Global X 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 Global X SuperIncome are associated (or correlated) with Invesco KBW. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco KBW Premium has no effect on the direction of Global X i.e., Global X and Invesco KBW go up and down completely randomly.

Pair Corralation between Global X and Invesco KBW

Given the investment horizon of 90 days Global X SuperIncome is expected to generate 0.51 times more return on investment than Invesco KBW. However, Global X SuperIncome is 1.96 times less risky than Invesco KBW. It trades about 0.19 of its potential returns per unit of risk. Invesco KBW Premium is currently generating about 0.05 per unit of risk. If you would invest  919.00  in Global X SuperIncome on August 16, 2024 and sell it today you would earn a total of  51.00  from holding Global X SuperIncome or generate 5.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Global X SuperIncome  vs.  Invesco KBW Premium

Global X SuperIncome

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Global X SuperIncome are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Global X is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Invesco KBW Premium

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco KBW Premium are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Invesco KBW is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Global X and Invesco KBW

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

The idea behind Global X SuperIncome and Invesco KBW Premium 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.