Correlation Between Invesco CEF and SPDR SSgA

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

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

Diversification Opportunities for Invesco CEF and SPDR SSgA

0.69

Correlation Coefficient

Invesco CEF  SPDR SSgA

Poor diversification

The 3 months correlation between Invesco and SPDR is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Invesco CEF Income and SPDR SSgA Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SSgA Income and Invesco CEF 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 CEF Income are associated (or correlated) with SPDR SSgA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SSgA Income has no effect on the direction of Invesco CEF i.e., Invesco CEF and SPDR SSgA go up and down completely randomly.

Pair Corralation between Invesco CEF and SPDR SSgA

Given the investment horizon of 90 days Invesco CEF is expected to generate 1.2 times less return on investment than SPDR SSgA. In addition to that, Invesco CEF is 1.44 times more volatile than SPDR SSgA Income. It trades about 0.08 of its total potential returns per unit of risk. SPDR SSgA Income is currently generating about 0.14 per unit of volatility. If you would invest  3,112  in SPDR SSgA Income on December 19, 2024 and sell it today you would earn a total of  103.00  from holding SPDR SSgA Income or generate 3.31% return on investment over 90 days.

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

Invesco CEF Income  vs.  SPDR SSgA Income

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 6 (%) 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.

SPDR SSgA Income

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SSgA Income are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward-looking signals, SPDR SSgA is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Invesco CEF and SPDR SSgA

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

The idea behind Invesco CEF Income and SPDR SSgA 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.