Correlation Between SPDR SP and Invesco DWA
Can any of the company-specific risk be diversified away by investing in both SPDR SP and Invesco DWA 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 DWA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR SP Biotech and Invesco DWA Industrials, you can compare the effects of market volatilities on SPDR SP and Invesco DWA 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 DWA. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and Invesco DWA.
Diversification Opportunities for SPDR SP and Invesco DWA
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between SPDR and Invesco is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP Biotech and Invesco DWA Industrials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco DWA Industrials 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 Biotech are associated (or correlated) with Invesco DWA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco DWA Industrials has no effect on the direction of SPDR SP i.e., SPDR SP and Invesco DWA go up and down completely randomly.
Pair Corralation between SPDR SP and Invesco DWA
Considering the 90-day investment horizon SPDR SP is expected to generate 2.81 times less return on investment than Invesco DWA. In addition to that, SPDR SP is 1.32 times more volatile than Invesco DWA Industrials. It trades about 0.03 of its total potential returns per unit of risk. Invesco DWA Industrials is currently generating about 0.11 per unit of volatility. If you would invest 8,633 in Invesco DWA Industrials on September 16, 2024 and sell it today you would earn a total of 7,905 from holding Invesco DWA Industrials or generate 91.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR SP Biotech vs. Invesco DWA Industrials
Performance |
| Timeline |
| SPDR SP Biotech |
| Invesco DWA Industrials |
SPDR SP and Invesco DWA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR SP and Invesco DWA
The main advantage of trading using opposite SPDR SP and Invesco DWA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP position performs unexpectedly, Invesco DWA 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 DWA will offset losses from the drop in Invesco DWA's long position.| SPDR SP vs. Invesco DWA Industrials | SPDR SP vs. Invesco DWA Consumer | SPDR SP vs. Invesco DWA Consumer | SPDR SP vs. Invesco DWA Basic |
| Invesco DWA vs. Invesco DWA Consumer | Invesco DWA vs. Invesco DWA Basic | Invesco DWA vs. Invesco DWA Consumer | Invesco DWA vs. Invesco DWA Financial |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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