Correlation Between Invesco DWA and SPDR Gold

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

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

Diversification Opportunities for Invesco DWA and SPDR Gold

0.3

Correlation Coefficient

Invesco DWA  SPDR Gold

Weak diversification

The 3 months correlation between Invesco and SPDR is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Invesco DWA Basic and SPDR Gold Shares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Gold Shares and Invesco DWA 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 DWA Basic are associated (or correlated) with SPDR Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Gold Shares has no effect on the direction of Invesco DWA i.e., Invesco DWA and SPDR Gold go up and down completely randomly.

Pair Corralation between Invesco DWA and SPDR Gold

Considering the 90-day investment horizon Invesco DWA Basic is expected to under-perform the SPDR Gold. But the etf apears to be less risky and, when comparing its historical volatility, Invesco DWA Basic is 1.35 times less risky than SPDR Gold. The etf trades about -0.08 of its potential returns per unit of risk. The SPDR Gold Shares is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  23,659  in SPDR Gold Shares on September 16, 2024 and sell it today you would earn a total of  770.00  from holding SPDR Gold Shares or generate 3.25% return on investment over 90 days.

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

Invesco DWA Basic  vs.  SPDR Gold Shares

Invesco DWA Basic

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco DWA Basic are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Invesco DWA is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

SPDR Gold Shares

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Gold Shares are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, SPDR Gold is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Invesco DWA and SPDR Gold

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

The idea behind Invesco DWA Basic and SPDR Gold Shares 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.