Correlation Between Invesco SP and SPDR Portfolio

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

By analyzing existing cross correlation between Invesco SP MidCap and SPDR Portfolio SP, you can compare the effects of market volatilities on Invesco SP and SPDR Portfolio 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 Portfolio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco SP and SPDR Portfolio.

Diversification Opportunities for Invesco SP and SPDR Portfolio

0.73

Correlation Coefficient

Invesco SP  SPDR Portfolio

Poor diversification

The 3 months correlation between Invesco and SPDR is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Invesco SP MidCap and SPDR Portfolio SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Portfolio SP 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 MidCap are associated (or correlated) with SPDR Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Portfolio SP has no effect on the direction of Invesco SP i.e., Invesco SP and SPDR Portfolio go up and down completely randomly.

Pair Corralation between Invesco SP and SPDR Portfolio

Given the investment horizon of 90 days Invesco SP MidCap is expected to generate 1.77 times more return on investment than SPDR Portfolio. However, Invesco SP is 1.77 times more volatile than SPDR Portfolio SP. It trades about 0.0 of its potential returns per unit of risk. SPDR Portfolio SP is currently generating about -0.07 per unit of risk. If you would invest  5,549  in Invesco SP MidCap on September 23, 2024 and sell it today you would lose (10.00) from holding Invesco SP MidCap or give up 0.18% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Invesco SP MidCap  vs.  SPDR Portfolio SP

Invesco SP MidCap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco SP MidCap has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable primary indicators, Invesco SP is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

SPDR Portfolio SP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR Portfolio SP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, SPDR Portfolio is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Invesco SP and SPDR Portfolio

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

The idea behind Invesco SP MidCap and SPDR Portfolio SP 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.