Correlation Between Invesco SP and SPDR SP

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

Diversification Opportunities for Invesco SP and SPDR SP

0.75
  Correlation Coefficient

Poor diversification

The 3 months correlation between Invesco and SPDR is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Invesco SP Emerging and SPDR SP Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Emerging 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 Emerging are associated (or correlated) with SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP Emerging has no effect on the direction of Invesco SP i.e., Invesco SP and SPDR SP go up and down completely randomly.

Pair Corralation between Invesco SP and SPDR SP

Given the investment horizon of 90 days Invesco SP is expected to generate 7.86 times less return on investment than SPDR SP. But when comparing it to its historical volatility, Invesco SP Emerging is 1.21 times less risky than SPDR SP. It trades about 0.0 of its potential returns per unit of risk. SPDR SP Emerging is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  5,380  in SPDR SP Emerging on December 29, 2023 and sell it today you would earn a total of  190.00  from holding SPDR SP Emerging or generate 3.53% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy99.8%
ValuesDaily Returns

Invesco SP Emerging  vs.  SPDR SP Emerging

 Performance 
       Timeline  
Invesco SP Emerging 

Risk-Adjusted Performance

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Low
 
High
Very Weak
Over the last 90 days Invesco SP Emerging has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable essential indicators, Invesco SP is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.
SPDR SP Emerging 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days SPDR SP Emerging has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, SPDR SP is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Invesco SP and SPDR SP Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Invesco SP and SPDR SP

The main advantage of trading using opposite Invesco SP and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco SP position performs unexpectedly, SPDR SP 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 SPDR SP will offset losses from the drop in SPDR SP's long position.
The idea behind Invesco SP Emerging and SPDR SP Emerging 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.

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