Correlation Between Invesco SP and SPDR SSGA

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

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

Diversification Opportunities for Invesco SP and SPDR SSGA

0.1

Correlation Coefficient

Invesco SP  SPDR SSGA

Average diversification

The 3 months correlation between Invesco and SPDR is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Invesco SP SmallCap and SPDR SSGA Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SSGA Large and Invesco 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 Invesco SP SmallCap are associated (or correlated) with SPDR SSGA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SSGA Large has no effect on the direction of Invesco SP i.e., Invesco SP and SPDR SSGA go up and down completely randomly.

Pair Corralation between Invesco SP and SPDR SSGA

Given the investment horizon of 90 days Invesco SP SmallCap is expected to under-perform the SPDR SSGA. In addition to that, Invesco SP is 1.18 times more volatile than SPDR SSGA Large. It trades about -0.04 of its total potential returns per unit of risk. SPDR SSGA Large is currently generating about 0.1 per unit of volatility. If you would invest  16,581  in SPDR SSGA Large on December 27, 2024 and sell it today you would earn a total of  728.00  from holding SPDR SSGA Large or generate 4.39% return on investment over 90 days.

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

Invesco SP SmallCap  vs.  SPDR SSGA Large

Invesco SP SmallCap

Risk-Adjusted Performance

Very Weak

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

SPDR SSGA Large

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SSGA Large are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable essential indicators, SPDR SSGA 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 SP and SPDR SSGA

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

The idea behind Invesco SP SmallCap and SPDR SSGA Large 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.