Correlation Between Invesco California and SPDR Nuveen

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

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

Diversification Opportunities for Invesco California and SPDR Nuveen

0.85

Correlation Coefficient

Invesco California  SPDR Nuveen

Very poor diversification

The 3 months correlation between Invesco and SPDR is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Invesco California AMT Free and SPDR Nuveen Bloomberg in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Nuveen Bloomberg and Invesco California 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 California AMT Free are associated (or correlated) with SPDR Nuveen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Nuveen Bloomberg has no effect on the direction of Invesco California i.e., Invesco California and SPDR Nuveen go up and down completely randomly.

Pair Corralation between Invesco California and SPDR Nuveen

Considering the 90-day investment horizon Invesco California is expected to generate 1.03 times less return on investment than SPDR Nuveen. In addition to that, Invesco California is 1.33 times more volatile than SPDR Nuveen Bloomberg. It trades about 0.08 of its total potential returns per unit of risk. SPDR Nuveen Bloomberg is currently generating about 0.11 per unit of volatility. If you would invest  4,568  in SPDR Nuveen Bloomberg on December 4, 2024 and sell it today you would earn a total of  27.00  from holding SPDR Nuveen Bloomberg or generate 0.59% return on investment over 90 days.

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

Invesco California AMT Free  vs.  SPDR Nuveen Bloomberg

Invesco California AMT

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco California AMT Free has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Invesco California is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

SPDR Nuveen Bloomberg

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR Nuveen Bloomberg has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, SPDR Nuveen is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Invesco California and SPDR Nuveen

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

The idea behind Invesco California AMT Free and SPDR Nuveen Bloomberg 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.