Correlation Between SPDR ICE and Invesco Variable

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

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

Diversification Opportunities for SPDR ICE and Invesco Variable

0.19

Correlation Coefficient

SPDR ICE  Invesco Variable

Average diversification

The 3 months correlation between SPDR and Invesco is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding SPDR ICE Preferred and Invesco Variable Rate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Variable Rate and SPDR ICE 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 ICE Preferred are associated (or correlated) with Invesco Variable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Variable Rate has no effect on the direction of SPDR ICE i.e., SPDR ICE and Invesco Variable go up and down completely randomly.

Pair Corralation between SPDR ICE and Invesco Variable

Considering the 90-day investment horizon SPDR ICE Preferred is expected to under-perform the Invesco Variable. In addition to that, SPDR ICE is 4.66 times more volatile than Invesco Variable Rate. It trades about -0.09 of its total potential returns per unit of risk. Invesco Variable Rate is currently generating about 0.19 per unit of volatility. If you would invest  2,425  in Invesco Variable Rate on August 30, 2024 and sell it today you would earn a total of  15.00  from holding Invesco Variable Rate or generate 0.62% return on investment over 90 days.

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

SPDR ICE Preferred  vs.  Invesco Variable Rate

SPDR ICE Preferred

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR ICE Preferred are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, SPDR ICE is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Invesco Variable Rate

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Variable Rate are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Invesco Variable is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with SPDR ICE and Invesco Variable

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

The idea behind SPDR ICE Preferred and Invesco Variable Rate 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.

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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.