Correlation Between SPDR Series and Invesco QQQ

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

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

Diversification Opportunities for SPDR Series and Invesco QQQ

0.47

Correlation Coefficient

SPDR Series  Invesco QQQ

Very weak diversification

The 3 months correlation between SPDR and Invesco is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Series Trust and Invesco QQQ Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco QQQ Trust and SPDR Series 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 Series Trust are associated (or correlated) with Invesco QQQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco QQQ Trust has no effect on the direction of SPDR Series i.e., SPDR Series and Invesco QQQ go up and down completely randomly.

Pair Corralation between SPDR Series and Invesco QQQ

Assuming the 90 days trading horizon SPDR Series is expected to generate 2.19 times less return on investment than Invesco QQQ. But when comparing it to its historical volatility, SPDR Series Trust is 6.45 times less risky than Invesco QQQ. It trades about 0.26 of its potential returns per unit of risk. Invesco QQQ Trust is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,052,559  in Invesco QQQ Trust on October 6, 2024 and sell it today you would earn a total of  19,742  from holding Invesco QQQ Trust or generate 1.88% return on investment over 90 days.

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

SPDR Series Trust  vs.  Invesco QQQ Trust

SPDR Series Trust

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Series Trust are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical and fundamental indicators, SPDR Series is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Invesco QQQ Trust

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco QQQ Trust are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Invesco QQQ showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SPDR Series and Invesco QQQ

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

The idea behind SPDR Series Trust and Invesco QQQ Trust 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.