Correlation Between SPDR SP and Invesco DWA
Can any of the company-specific risk be diversified away by investing in both SPDR SP and Invesco DWA 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 SPDR SP and Invesco DWA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR SP Dividend and Invesco DWA Emerging, you can compare the effects of market volatilities on SPDR SP and Invesco DWA 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 SPDR SP with a short position of Invesco DWA. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and Invesco DWA.
Diversification Opportunities for SPDR SP and Invesco DWA
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SPDR and Invesco is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP Dividend and Invesco DWA Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco DWA Emerging and SPDR 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 SPDR SP Dividend are associated (or correlated) with Invesco DWA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco DWA Emerging has no effect on the direction of SPDR SP i.e., SPDR SP and Invesco DWA go up and down completely randomly.
Pair Corralation between SPDR SP and Invesco DWA
Considering the 90-day investment horizon SPDR SP Dividend is expected to under-perform the Invesco DWA. But the etf apears to be less risky and, when comparing its historical volatility, SPDR SP Dividend is 1.45 times less risky than Invesco DWA. The etf trades about -0.02 of its potential returns per unit of risk. The Invesco DWA Emerging is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 2,083 in Invesco DWA Emerging on January 25, 2024 and sell it today you would lose (6.00) from holding Invesco DWA Emerging or give up 0.29% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
SPDR SP Dividend vs. Invesco DWA Emerging
Performance |
| Timeline |
| SPDR SP Dividend |
| Invesco DWA Emerging |
SPDR SP and Invesco DWA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR SP and Invesco DWA
The main advantage of trading using opposite SPDR SP and Invesco DWA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP position performs unexpectedly, Invesco DWA 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 DWA will offset losses from the drop in Invesco DWA's long position.| SPDR SP vs. Vanguard Quality Factor | SPDR SP vs. Vanguard Momentum Factor | SPDR SP vs. Vanguard Multifactor | SPDR SP vs. Vanguard Minimum Volatility |
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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 the Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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