Correlation Between SPDR Russell and Invesco DWA

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

By analyzing existing cross correlation between SPDR Russell Small and Invesco DWA Emerging, you can compare the effects of market volatilities on SPDR Russell and Invesco DWA 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 DWA. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Russell and Invesco DWA.

Diversification Opportunities for SPDR Russell and Invesco DWA

-0.1

Correlation Coefficient

SPDR Russell  Invesco DWA

Good diversification

The 3 months correlation between SPDR and Invesco is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Russell Small and Invesco DWA Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco DWA Emerging 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 Small are associated (or correlated) with Invesco DWA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco DWA Emerging has no effect on the direction of SPDR Russell i.e., SPDR Russell and Invesco DWA go up and down completely randomly.

Pair Corralation between SPDR Russell and Invesco DWA

Given the investment horizon of 90 days SPDR Russell Small is expected to under-perform the Invesco DWA. In addition to that, SPDR Russell is 1.1 times more volatile than Invesco DWA Emerging. It trades about -0.25 of its total potential returns per unit of risk. Invesco DWA Emerging is currently generating about -0.15 per unit of volatility. If you would invest  1,998  in Invesco DWA Emerging on October 6, 2024 and sell it today you would lose (59.00) from holding Invesco DWA Emerging or give up 2.95% of portfolio value over 90 days.

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

SPDR Russell Small  vs.  Invesco DWA Emerging

SPDR Russell Small

Risk-Adjusted Performance

3 of 100

Insignificant

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

Invesco DWA Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco DWA Emerging has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward indicators, Invesco DWA is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with SPDR Russell and Invesco DWA

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

The idea behind SPDR Russell Small and Invesco DWA Emerging 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..