Correlation Between Invesco DWA and SPDR SP
Can any of the company-specific risk be diversified away by investing in both Invesco DWA and SPDR SP 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 DWA and SPDR SP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Invesco DWA Momentum and SPDR SP 600, you can compare the effects of market volatilities on Invesco DWA and SPDR SP 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 DWA with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco DWA and SPDR SP.
Diversification Opportunities for Invesco DWA and SPDR SP
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Invesco and SPDR is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Invesco DWA Momentum and SPDR SP 600 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP 600 and Invesco DWA 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 DWA Momentum are associated (or correlated) with SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP 600 has no effect on the direction of Invesco DWA i.e., Invesco DWA and SPDR SP go up and down completely randomly.
Pair Corralation between Invesco DWA and SPDR SP
Considering the 90-day investment horizon Invesco DWA Momentum is expected to generate 0.87 times more return on investment than SPDR SP. However, Invesco DWA Momentum is 1.14 times less risky than SPDR SP. It trades about 0.12 of its potential returns per unit of risk. SPDR SP 600 is currently generating about 0.09 per unit of risk. If you would invest 9,767 in Invesco DWA Momentum on August 25, 2024 and sell it today you would earn a total of 1,808 from holding Invesco DWA Momentum or generate 18.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Invesco DWA Momentum vs. SPDR SP 600
Performance |
| Timeline |
| Invesco DWA Momentum |
| SPDR SP 600 |
Invesco DWA and SPDR SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Invesco DWA and SPDR SP
The main advantage of trading using opposite Invesco DWA and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco DWA position performs unexpectedly, SPDR SP 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 SP will offset losses from the drop in SPDR SP's long position.| Invesco DWA vs. Invesco DWA Developed | Invesco DWA vs. Invesco DWA Emerging | Invesco DWA vs. Invesco DWA SmallCap | Invesco DWA vs. First Trust Dorsey |
| SPDR SP vs. Invesco DWA Momentum | SPDR SP vs. Invesco DWA Developed | SPDR SP vs. Invesco DWA Emerging | SPDR SP vs. First Trust Small |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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