Correlation Between SPDR SP and Invesco Markets

Can any of the company-specific risk be diversified away by investing in both SPDR SP and Invesco Markets 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 Markets 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 Markets III, you can compare the effects of market volatilities on SPDR SP and Invesco Markets 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 Markets. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and Invesco Markets.

Diversification Opportunities for SPDR SP and Invesco Markets

-0.35

Correlation Coefficient

SPDR SP  Invesco Markets

Very good diversification

The 3 months correlation between SPDR and Invesco is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP 500 and Invesco Markets III in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Markets III 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 Markets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Markets III has no effect on the direction of SPDR SP i.e., SPDR SP and Invesco Markets go up and down completely randomly.

Pair Corralation between SPDR SP and Invesco Markets

Assuming the 90 days trading horizon SPDR SP 500 is expected to generate 0.62 times more return on investment than Invesco Markets. However, SPDR SP 500 is 1.62 times less risky than Invesco Markets. It trades about 0.03 of its potential returns per unit of risk. Invesco Markets III is currently generating about -0.04 per unit of risk. If you would invest  57,237  in SPDR SP 500 on September 27, 2024 and sell it today you would earn a total of  183.00  from holding SPDR SP 500 or generate 0.32% return on investment over 90 days.

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

SPDR SP 500  vs.  Invesco Markets III

SPDR SP 500

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP 500 are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, SPDR SP may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Invesco Markets III

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco Markets III has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Invesco Markets 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 Markets

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

The idea behind SPDR SP 500 and Invesco Markets III 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.