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 Metals and Invesco DB Agriculture, 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

-0.48

Correlation Coefficient

SPDR SP  Invesco DB

Very good diversification

The 3 months correlation between SPDR and Invesco is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP Metals and Invesco DB Agriculture in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco DB Agriculture 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 Metals 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 Agriculture 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

Considering the 90-day investment horizon SPDR SP Metals is expected to under-perform the Invesco DB. In addition to that, SPDR SP is 1.84 times more volatile than Invesco DB Agriculture. It trades about -0.18 of its total potential returns per unit of risk. Invesco DB Agriculture is currently generating about 0.11 per unit of volatility. If you would invest  2,571  in Invesco DB Agriculture on November 28, 2024 and sell it today you would earn a total of  135.00  from holding Invesco DB Agriculture or generate 5.25% return on investment over 90 days.

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

SPDR SP Metals  vs.  Invesco DB Agriculture

SPDR SP Metals

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR SP Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Etf's primary indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for the fund shareholders.

Invesco DB Agriculture

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco DB Agriculture are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, Invesco DB is not utilizing all of its potentials. The latest 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 Metals and Invesco DB Agriculture 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.