Correlation Between Invesco Aerospace and SPDR SP
Can any of the company-specific risk be diversified away by investing in both Invesco Aerospace 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 Aerospace 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 Aerospace Defense and SPDR SP 600, you can compare the effects of market volatilities on Invesco Aerospace 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 Aerospace with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco Aerospace and SPDR SP.
Diversification Opportunities for Invesco Aerospace and SPDR SP
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Invesco and SPDR is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Aerospace Defense 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 Aerospace 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 Aerospace Defense 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 Aerospace i.e., Invesco Aerospace and SPDR SP go up and down completely randomly.
Pair Corralation between Invesco Aerospace and SPDR SP
Considering the 90-day investment horizon Invesco Aerospace is expected to generate 1.08 times less return on investment than SPDR SP. But when comparing it to its historical volatility, Invesco Aerospace Defense is 1.3 times less risky than SPDR SP. It trades about 0.11 of its potential returns per unit of risk. SPDR SP 600 is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 7,917 in SPDR SP 600 on August 24, 2024 and sell it today you would earn a total of 1,236 from holding SPDR SP 600 or generate 15.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Invesco Aerospace Defense vs. SPDR SP 600
Performance |
| Timeline |
| Invesco Aerospace Defense |
| SPDR SP 600 |
Invesco Aerospace and SPDR SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Invesco Aerospace and SPDR SP
The main advantage of trading using opposite Invesco Aerospace and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco Aerospace 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 Aerospace vs. SPDR SP Aerospace | Invesco Aerospace vs. iShares Aerospace Defense | Invesco Aerospace vs. Invesco Dynamic Building | Invesco Aerospace vs. Invesco Dynamic Semiconductors |
| SPDR SP vs. Dimensional ETF Trust | SPDR SP vs. Vanguard Small Cap Index | SPDR SP vs. First Trust Multi Manager | SPDR SP vs. Vanguard SP Small Cap |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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