Correlation Between SPDR SP and Invesco DB

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

By analyzing existing cross correlation between SPDR SP 500 and Invesco DB Dollar, you can compare the effects of market volatilities on SPDR SP and Invesco DB 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 SP with a short position of Invesco DB. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and Invesco DB.

Diversification Opportunities for SPDR SP and Invesco DB

0.0

Correlation Coefficient

SPDR SP  Invesco DB

Pay attention - limited upside

The 3 months correlation between SPDR and Invesco is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP 500 and Invesco DB Dollar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco DB Dollar and SPDR SP 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 SP 500 are associated (or correlated) with Invesco DB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco DB Dollar has no effect on the direction of SPDR SP i.e., SPDR SP and Invesco DB go up and down completely randomly.

Pair Corralation between SPDR SP and Invesco DB

If you would invest  1,145,630  in SPDR SP 500 on September 5, 2024 and sell it today you would earn a total of  82,534  from holding SPDR SP 500 or generate 7.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

SPDR SP 500  vs.  Invesco DB Dollar

SPDR SP 500

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP 500 are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, SPDR SP may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Invesco DB Dollar

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with SPDR SP and Invesco DB

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

The idea behind SPDR SP 500 and Invesco DB Dollar 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.