Correlation Between Invesco International and SPDR FTSE
Can any of the company-specific risk be diversified away by investing in both Invesco International and SPDR FTSE 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 International and SPDR FTSE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Invesco International Corporate and SPDR FTSE International, you can compare the effects of market volatilities on Invesco International and SPDR FTSE 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 International with a short position of SPDR FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco International and SPDR FTSE.
Diversification Opportunities for Invesco International and SPDR FTSE
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Invesco and SPDR is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Invesco International Corporat and SPDR FTSE International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR FTSE International and Invesco International 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 International Corporate are associated (or correlated) with SPDR FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR FTSE International has no effect on the direction of Invesco International i.e., Invesco International and SPDR FTSE go up and down completely randomly.
Pair Corralation between Invesco International and SPDR FTSE
Given the investment horizon of 90 days Invesco International Corporate is expected to under-perform the SPDR FTSE. But the etf apears to be less risky and, when comparing its historical volatility, Invesco International Corporate is 1.03 times less risky than SPDR FTSE. The etf trades about -0.31 of its potential returns per unit of risk. The SPDR FTSE International is currently generating about -0.21 of returns per unit of risk over similar time horizon. If you would invest 3,821 in SPDR FTSE International on August 25, 2024 and sell it today you would lose (95.00) from holding SPDR FTSE International or give up 2.49% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Invesco International Corporat vs. SPDR FTSE International
Performance |
| Timeline |
| Invesco International |
| SPDR FTSE International |
Invesco International and SPDR FTSE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Invesco International and SPDR FTSE
The main advantage of trading using opposite Invesco International and SPDR FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco International position performs unexpectedly, SPDR FTSE 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 FTSE will offset losses from the drop in SPDR FTSE's long position.The idea behind Invesco International Corporate and SPDR FTSE International 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.
| SPDR FTSE vs. iShares International Treasury | SPDR FTSE vs. SPDR Bloomberg International | SPDR FTSE vs. SPDR Bloomberg Short | SPDR FTSE vs. Invesco International Corporate |
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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