Correlation Between SPDR Kensho and Invesco ESG

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

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

Diversification Opportunities for SPDR Kensho and Invesco ESG

0.96

Correlation Coefficient

SPDR Kensho  Invesco ESG

Almost no diversification

The 3 months correlation between SPDR and Invesco is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Kensho New and Invesco ESG NASDAQ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco ESG NASDAQ and SPDR Kensho 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 Kensho New are associated (or correlated) with Invesco ESG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco ESG NASDAQ has no effect on the direction of SPDR Kensho i.e., SPDR Kensho and Invesco ESG go up and down completely randomly.

Pair Corralation between SPDR Kensho and Invesco ESG

Given the investment horizon of 90 days SPDR Kensho New is expected to under-perform the Invesco ESG. In addition to that, SPDR Kensho is 1.23 times more volatile than Invesco ESG NASDAQ. It trades about -0.05 of its total potential returns per unit of risk. Invesco ESG NASDAQ is currently generating about -0.05 per unit of volatility. If you would invest  2,367  in Invesco ESG NASDAQ on December 28, 2024 and sell it today you would lose (102.00) from holding Invesco ESG NASDAQ or give up 4.31% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

SPDR Kensho New  vs.  Invesco ESG NASDAQ

SPDR Kensho New

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR Kensho New has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable primary indicators, SPDR Kensho is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Invesco ESG NASDAQ

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco ESG NASDAQ has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward-looking indicators, Invesco ESG 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 Kensho and Invesco ESG

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

The idea behind SPDR Kensho New and Invesco ESG NASDAQ 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.