Correlation Between Invesco SP and SPDR SP
Can any of the company-specific risk be diversified away by investing in both Invesco SP 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 SP 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 SP SmallCap and SPDR SP 600, you can compare the effects of market volatilities on Invesco SP 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 SP with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco SP and SPDR SP.
Diversification Opportunities for Invesco SP and SPDR SP
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Invesco and SPDR is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Invesco SP SmallCap 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 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 Invesco SP SmallCap 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 SP i.e., Invesco SP and SPDR SP go up and down completely randomly.
Pair Corralation between Invesco SP and SPDR SP
Considering the 90-day investment horizon Invesco SP SmallCap is expected to generate 1.06 times more return on investment than SPDR SP. However, Invesco SP is 1.06 times more volatile than SPDR SP 600. It trades about 0.26 of its potential returns per unit of risk. SPDR SP 600 is currently generating about 0.25 per unit of risk. If you would invest 4,973 in Invesco SP SmallCap on August 26, 2024 and sell it today you would earn a total of 496.00 from holding Invesco SP SmallCap or generate 9.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Invesco SP SmallCap vs. SPDR SP 600
Performance |
| Timeline |
| Invesco SP SmallCap |
| SPDR SP 600 |
Invesco SP and SPDR SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Invesco SP and SPDR SP
The main advantage of trading using opposite Invesco SP and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco SP 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 SP vs. Invesco DWA Momentum | Invesco SP vs. Invesco DWA Developed | Invesco SP vs. Invesco DWA Emerging | Invesco SP vs. First Trust Small |
| SPDR SP vs. SPDR SP 600 | SPDR SP vs. SPDR SP 400 | SPDR SP vs. SPDR SP 400 | SPDR SP vs. Invesco SP SmallCap |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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