Correlation Between SPDR Portfolio and Invesco SP

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

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

Diversification Opportunities for SPDR Portfolio and Invesco SP

-0.42

Correlation Coefficient

SPDR Portfolio  Invesco SP

Very good diversification

The 3 months correlation between SPDR and Invesco is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Portfolio Aggregate and Invesco SP Ultra in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco SP Ultra and SPDR Portfolio 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 Portfolio Aggregate are associated (or correlated) with Invesco SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco SP Ultra has no effect on the direction of SPDR Portfolio i.e., SPDR Portfolio and Invesco SP go up and down completely randomly.

Pair Corralation between SPDR Portfolio and Invesco SP

Given the investment horizon of 90 days SPDR Portfolio is expected to generate 3.1 times less return on investment than Invesco SP. But when comparing it to its historical volatility, SPDR Portfolio Aggregate is 2.76 times less risky than Invesco SP. It trades about 0.04 of its potential returns per unit of risk. Invesco SP Ultra is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  4,055  in Invesco SP Ultra on September 19, 2024 and sell it today you would earn a total of  914.00  from holding Invesco SP Ultra or generate 22.54% return on investment over 90 days.

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

SPDR Portfolio Aggregate  vs.  Invesco SP Ultra

SPDR Portfolio Aggregate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR Portfolio Aggregate has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, SPDR Portfolio is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Invesco SP Ultra

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Invesco SP Ultra has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable forward indicators, Invesco SP is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with SPDR Portfolio and Invesco SP

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

The idea behind SPDR Portfolio Aggregate and Invesco SP Ultra 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.