Correlation Between SPDR SP and Invesco Aerospace
Can any of the company-specific risk be diversified away by investing in both SPDR SP and Invesco Aerospace 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 SPDR SP and Invesco Aerospace into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR SP Aerospace and Invesco Aerospace Defense, you can compare the effects of market volatilities on SPDR SP and Invesco Aerospace 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 SPDR SP with a short position of Invesco Aerospace. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and Invesco Aerospace.
Diversification Opportunities for SPDR SP and Invesco Aerospace
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SPDR and Invesco is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP Aerospace and Invesco Aerospace Defense in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Aerospace Defense and SPDR 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 SPDR SP Aerospace are associated (or correlated) with Invesco Aerospace. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Aerospace Defense has no effect on the direction of SPDR SP i.e., SPDR SP and Invesco Aerospace go up and down completely randomly.
Pair Corralation between SPDR SP and Invesco Aerospace
Considering the 90-day investment horizon SPDR SP Aerospace is expected to generate 1.51 times more return on investment than Invesco Aerospace. However, SPDR SP is 1.51 times more volatile than Invesco Aerospace Defense. It trades about 0.33 of its potential returns per unit of risk. Invesco Aerospace Defense is currently generating about 0.34 per unit of risk. If you would invest 16,573 in SPDR SP Aerospace on October 24, 2024 and sell it today you would earn a total of 1,503 from holding SPDR SP Aerospace or generate 9.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR SP Aerospace vs. Invesco Aerospace Defense
Performance |
| Timeline |
| SPDR SP Aerospace |
| Invesco Aerospace Defense |
SPDR SP and Invesco Aerospace Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR SP and Invesco Aerospace
The main advantage of trading using opposite SPDR SP and Invesco Aerospace positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP position performs unexpectedly, Invesco Aerospace 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 Invesco Aerospace will offset losses from the drop in Invesco Aerospace's long position.| SPDR SP vs. Invesco Aerospace Defense | SPDR SP vs. iShares Aerospace Defense | SPDR SP vs. SPDR SP Health | SPDR SP vs. SPDR SP Transportation |
| Invesco Aerospace vs. SPDR SP Aerospace | Invesco Aerospace vs. iShares Aerospace Defense | Invesco Aerospace vs. Invesco Dynamic Building | Invesco Aerospace vs. Invesco Dynamic Semiconductors |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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