Correlation Between Invesco Technology and SPDR Bloomberg

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

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

Diversification Opportunities for Invesco Technology and SPDR Bloomberg

-0.35

Correlation Coefficient

Invesco Technology  SPDR Bloomberg

Very good diversification

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

Pair Corralation between Invesco Technology and SPDR Bloomberg

Assuming the 90 days trading horizon Invesco Technology SP is expected to generate 4.38 times more return on investment than SPDR Bloomberg. However, Invesco Technology is 4.38 times more volatile than SPDR Bloomberg Global. It trades about 0.12 of its potential returns per unit of risk. SPDR Bloomberg Global is currently generating about -0.01 per unit of risk. If you would invest  32,110  in Invesco Technology SP on October 11, 2024 and sell it today you would earn a total of  37,030  from holding Invesco Technology SP or generate 115.32% return on investment over 90 days.

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

Invesco Technology SP  vs.  SPDR Bloomberg Global

Invesco Technology

Risk-Adjusted Performance

3 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Technology SP are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Invesco Technology is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

SPDR Bloomberg Global

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Invesco Technology and SPDR Bloomberg

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

The idea behind Invesco Technology SP and SPDR Bloomberg Global 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.