Correlation Between Invesco and SPDR SP

Can any of the company-specific risk be diversified away by investing in both Invesco 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 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 and SPDR SP Semiconductor, you can compare the effects of market volatilities on Invesco 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 with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco and SPDR SP.

Diversification Opportunities for Invesco and SPDR SP

0.58

Correlation Coefficient

Invesco  SPDR SP

Very weak diversification

The 3 months correlation between Invesco and SPDR is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Invesco and SPDR SP Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Semiconductor and Invesco 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 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 Semiconductor has no effect on the direction of Invesco i.e., Invesco and SPDR SP go up and down completely randomly.

Pair Corralation between Invesco and SPDR SP

If you would invest  22,332  in SPDR SP Semiconductor on September 12, 2024 and sell it today you would earn a total of  2,969  from holding SPDR SP Semiconductor or generate 13.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	1.59%
Values	Daily Returns

Invesco  vs.  SPDR SP Semiconductor

Invesco

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively steady basic indicators, Invesco is not utilizing all of its potentials. The latest stock price chaos, may contribute to medium-term losses for the stakeholders.

SPDR SP Semiconductor

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP Semiconductor are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, SPDR SP exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Invesco and SPDR SP

The main advantage of trading using opposite Invesco and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco 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.

The idea behind Invesco and SPDR SP Semiconductor 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.

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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.