Correlation Between SPDR SP and Invesco Dynamic

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

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

Diversification Opportunities for SPDR SP and Invesco Dynamic

0.93

Correlation Coefficient

SPDR SP  Invesco Dynamic

Almost no diversification

The 3 months correlation between SPDR and Invesco is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP Oil and Invesco Dynamic Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Dynamic Energy 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 Oil are associated (or correlated) with Invesco Dynamic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Dynamic Energy has no effect on the direction of SPDR SP i.e., SPDR SP and Invesco Dynamic go up and down completely randomly.

Pair Corralation between SPDR SP and Invesco Dynamic

Considering the 90-day investment horizon SPDR SP Oil is expected to under-perform the Invesco Dynamic. In addition to that, SPDR SP is 1.15 times more volatile than Invesco Dynamic Energy. It trades about -0.04 of its total potential returns per unit of risk. Invesco Dynamic Energy is currently generating about 0.03 per unit of volatility. If you would invest  2,899  in Invesco Dynamic Energy on December 28, 2024 and sell it today you would earn a total of  56.00  from holding Invesco Dynamic Energy or generate 1.93% return on investment over 90 days.

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

SPDR SP Oil  vs.  Invesco Dynamic Energy

SPDR SP Oil

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR SP Oil has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, SPDR SP is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Invesco Dynamic Energy

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Dynamic Energy are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Invesco Dynamic is not utilizing all of its potentials. The new stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with SPDR SP and Invesco Dynamic

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

The idea behind SPDR SP Oil and Invesco Dynamic Energy 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.