Correlation Between Invesco Water and SPDR SP
Can any of the company-specific risk be diversified away by investing in both Invesco Water 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 Water 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 Water Resources and SPDR SP North, you can compare the effects of market volatilities on Invesco Water 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 Water with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco Water and SPDR SP.
Diversification Opportunities for Invesco Water and SPDR SP
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Invesco and SPDR is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Water Resources and SPDR SP North in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP North and Invesco Water 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 Water Resources 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 North has no effect on the direction of Invesco Water i.e., Invesco Water and SPDR SP go up and down completely randomly.
Pair Corralation between Invesco Water and SPDR SP
Considering the 90-day investment horizon Invesco Water Resources is expected to generate 0.93 times more return on investment than SPDR SP. However, Invesco Water Resources is 1.07 times less risky than SPDR SP. It trades about 0.08 of its potential returns per unit of risk. SPDR SP North is currently generating about 0.04 per unit of risk. If you would invest 6,570 in Invesco Water Resources on September 3, 2024 and sell it today you would earn a total of 606.00 from holding Invesco Water Resources or generate 9.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Invesco Water Resources vs. SPDR SP North
Performance |
| Timeline |
| Invesco Water Resources |
| SPDR SP North |
Invesco Water and SPDR SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Invesco Water and SPDR SP
The main advantage of trading using opposite Invesco Water and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco Water 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 Water vs. Invesco SP Global | Invesco Water vs. Invesco Global Water | Invesco Water vs. First Trust Water | Invesco Water vs. Invesco WilderHill Clean |
| SPDR SP vs. Vanguard Industrials Index | SPDR SP vs. Vanguard Communication Services | SPDR SP vs. Vanguard Consumer Discretionary | SPDR SP vs. Vanguard Consumer Staples |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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