Correlation Between SPDR SSgA and Invesco CEF

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

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

Diversification Opportunities for SPDR SSgA and Invesco CEF

0.62

Correlation Coefficient

SPDR SSgA  Invesco CEF

Poor diversification

The 3 months correlation between SPDR and Invesco is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SSgA Global and Invesco CEF Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco CEF Income and SPDR SSgA 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 SSgA Global are associated (or correlated) with Invesco CEF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco CEF Income has no effect on the direction of SPDR SSgA i.e., SPDR SSgA and Invesco CEF go up and down completely randomly.

Pair Corralation between SPDR SSgA and Invesco CEF

Considering the 90-day investment horizon SPDR SSgA Global is expected to generate 0.96 times more return on investment than Invesco CEF. However, SPDR SSgA Global is 1.04 times less risky than Invesco CEF. It trades about 0.06 of its potential returns per unit of risk. Invesco CEF Income is currently generating about 0.05 per unit of risk. If you would invest  4,409  in SPDR SSgA Global on December 28, 2024 and sell it today you would earn a total of  76.00  from holding SPDR SSgA Global or generate 1.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

SPDR SSgA Global  vs.  Invesco CEF Income

SPDR SSgA Global

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SSgA Global are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, SPDR SSgA is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Invesco CEF Income

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco CEF Income are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Invesco CEF is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with SPDR SSgA and Invesco CEF

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

The idea behind SPDR SSgA Global and Invesco CEF Income 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.