Correlation Between Altus Power and Invesco QQQ

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

Diversification Opportunities for Altus Power and Invesco QQQ

0.0
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Altus and Invesco is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Altus Power 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 Altus Power 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 Altus Power 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 Altus Power i.e., Altus Power and Invesco QQQ go up and down completely randomly.

Pair Corralation between Altus Power and Invesco QQQ

If you would invest  29,336  in Invesco QQQ Trust on September 1, 2022 and sell it today you would earn a total of  0.00  from holding Invesco QQQ Trust or generate 0.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Altus Power  vs.  Invesco QQQ Trust

 Performance (%) 
       Timeline  
Altus Power 
Altus Performance
0 of 100
Over the last 90 days Altus Power has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Altus Power is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.
Invesco QQQ Trust 
Invesco Performance
0 of 100
Over the last 90 days Invesco QQQ Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Invesco QQQ is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the insiders.

Altus Power and Invesco QQQ Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Altus Power and Invesco QQQ

The main advantage of trading using opposite Altus Power and Invesco QQQ positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Altus Power 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 effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against Altus Power as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. Altus Power's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, Altus Power's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to Altus Power.
The idea behind Altus Power 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.
The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against Invesco QQQ as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. Invesco QQQ's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, Invesco QQQ's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to Invesco QQQ Trust.
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.

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