Correlation Between SPDR Russell and Invesco EQQQ

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

By analyzing existing cross correlation between SPDR Russell 2000 and Invesco EQQQ NASDAQ 100, you can compare the effects of market volatilities on SPDR Russell and Invesco EQQQ 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 Russell with a short position of Invesco EQQQ. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Russell and Invesco EQQQ.

Diversification Opportunities for SPDR Russell and Invesco EQQQ

0.74

Correlation Coefficient

SPDR Russell  Invesco EQQQ

Poor diversification

The 3 months correlation between SPDR and Invesco is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Russell 2000 and Invesco EQQQ NASDAQ 100 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco EQQQ NASDAQ and SPDR Russell 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 Russell 2000 are associated (or correlated) with Invesco EQQQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco EQQQ NASDAQ has no effect on the direction of SPDR Russell i.e., SPDR Russell and Invesco EQQQ go up and down completely randomly.

Pair Corralation between SPDR Russell and Invesco EQQQ

Assuming the 90 days trading horizon SPDR Russell 2000 is expected to generate 1.5 times more return on investment than Invesco EQQQ. However, SPDR Russell is 1.5 times more volatile than Invesco EQQQ NASDAQ 100. It trades about 0.04 of its potential returns per unit of risk. Invesco EQQQ NASDAQ 100 is currently generating about 0.04 per unit of risk. If you would invest  5,600  in SPDR Russell 2000 on October 15, 2024 and sell it today you would earn a total of  146.00  from holding SPDR Russell 2000 or generate 2.61% return on investment over 90 days.

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

SPDR Russell 2000  vs.  Invesco EQQQ NASDAQ 100

SPDR Russell 2000

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Russell 2000 are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, SPDR Russell is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Invesco EQQQ NASDAQ

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco EQQQ NASDAQ 100 are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Invesco EQQQ is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with SPDR Russell and Invesco EQQQ

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

The idea behind SPDR Russell 2000 and Invesco EQQQ NASDAQ 100 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.