Correlation Between Invesco Solar and SPDR Barclays

Can any of the company-specific risk be diversified away by investing in both Invesco Solar and SPDR Barclays 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 Solar and SPDR Barclays into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Invesco Solar Energy and SPDR Barclays 10, you can compare the effects of market volatilities on Invesco Solar and SPDR Barclays 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 Solar with a short position of SPDR Barclays. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco Solar and SPDR Barclays.

Diversification Opportunities for Invesco Solar and SPDR Barclays

0.63

Correlation Coefficient

Invesco Solar  SPDR Barclays

Poor diversification

The 3 months correlation between Invesco and SPDR is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Solar Energy and SPDR Barclays 10 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Barclays 10 and Invesco Solar 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 Solar Energy are associated (or correlated) with SPDR Barclays. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Barclays 10 has no effect on the direction of Invesco Solar i.e., Invesco Solar and SPDR Barclays go up and down completely randomly.

Pair Corralation between Invesco Solar and SPDR Barclays

Assuming the 90 days trading horizon Invesco Solar Energy is expected to under-perform the SPDR Barclays. In addition to that, Invesco Solar is 4.01 times more volatile than SPDR Barclays 10. It trades about -0.07 of its total potential returns per unit of risk. SPDR Barclays 10 is currently generating about -0.06 per unit of volatility. If you would invest  2,859  in SPDR Barclays 10 on September 13, 2024 and sell it today you would lose (66.00) from holding SPDR Barclays 10 or give up 2.31% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Invesco Solar Energy  vs.  SPDR Barclays 10

Invesco Solar Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco Solar Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Etf's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

SPDR Barclays 10

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR Barclays 10 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, SPDR Barclays is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Invesco Solar and SPDR Barclays

The main advantage of trading using opposite Invesco Solar and SPDR Barclays positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco Solar position performs unexpectedly, SPDR Barclays 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 Barclays will offset losses from the drop in SPDR Barclays' long position.

The idea behind Invesco Solar Energy and SPDR Barclays 10 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.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.