Correlation Between SPDR SP and Invesco DWA
Can any of the company-specific risk be diversified away by investing in both SPDR SP and Invesco DWA 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 DWA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR SP International and Invesco DWA Utilities, you can compare the effects of market volatilities on SPDR SP and Invesco DWA 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 DWA. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and Invesco DWA.
Diversification Opportunities for SPDR SP and Invesco DWA
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between SPDR and Invesco is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP International and Invesco DWA Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco DWA Utilities 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 International are associated (or correlated) with Invesco DWA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco DWA Utilities has no effect on the direction of SPDR SP i.e., SPDR SP and Invesco DWA go up and down completely randomly.
Pair Corralation between SPDR SP and Invesco DWA
Considering the 90-day investment horizon SPDR SP International is expected to under-perform the Invesco DWA. But the etf apears to be less risky and, when comparing its historical volatility, SPDR SP International is 1.61 times less risky than Invesco DWA. The etf trades about -0.16 of its potential returns per unit of risk. The Invesco DWA Utilities is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 4,009 in Invesco DWA Utilities on August 23, 2024 and sell it today you would earn a total of 227.00 from holding Invesco DWA Utilities or generate 5.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR SP International vs. Invesco DWA Utilities
Performance |
| Timeline |
| SPDR SP International |
| Invesco DWA Utilities |
SPDR SP and Invesco DWA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR SP and Invesco DWA
The main advantage of trading using opposite SPDR SP and Invesco DWA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP position performs unexpectedly, Invesco DWA 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 DWA will offset losses from the drop in Invesco DWA's long position.| SPDR SP vs. SPDR SP Emerging | SPDR SP vs. iShares International Select | SPDR SP vs. First Trust Dow | SPDR SP vs. Invesco International Dividend |
| Invesco DWA vs. Invesco DWA Consumer | Invesco DWA vs. Invesco DWA Basic | Invesco DWA vs. Invesco Dynamic Large |
Check out your portfolio center.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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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