Correlation Between Invesco SP and SPDR SP
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 500 and SPDR SP 500, 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
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Invesco and SPDR is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Invesco SP 500 and SPDR SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP 500 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 500 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 500 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 1.47 times less return on investment than SPDR SP. But when comparing it to its historical volatility, Invesco SP 500 is 1.45 times less risky than SPDR SP. It trades about 0.08 of its potential returns per unit of risk. SPDR SP 500 is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 48,652 in SPDR SP 500 on January 25, 2024 and sell it today you would earn a total of 1,913 from holding SPDR SP 500 or generate 3.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 98.44% |
| Values | Daily Returns |
Invesco SP 500 vs. SPDR SP 500
Performance |
| Timeline |
| Invesco SP 500 |
| SPDR SP 500 |
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.| Invesco SP vs. SPDR MSCI EAFE | Invesco SP vs. SPDR MSCI Emerging | Invesco SP vs. SPDR Russell 1000 | Invesco SP vs. SPDR Russell 1000 |
| SPDR SP vs. SPDR MSCI EAFE | SPDR SP vs. SPDR MSCI Emerging | SPDR SP vs. SPDR Russell 1000 | SPDR SP vs. SPDR Russell 1000 |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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