Correlation Between SPDR SSGA and Invesco SP

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

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

Diversification Opportunities for SPDR SSGA and Invesco SP

0.97

Correlation Coefficient

SPDR SSGA  Invesco SP

Almost no diversification

The 3 months correlation between SPDR and Invesco is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SSGA Small and Invesco SP SmallCap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco SP SmallCap and SPDR SSGA 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 SSGA Small are associated (or correlated) with Invesco SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco SP SmallCap has no effect on the direction of SPDR SSGA i.e., SPDR SSGA and Invesco SP go up and down completely randomly.

Pair Corralation between SPDR SSGA and Invesco SP

Given the investment horizon of 90 days SPDR SSGA Small is expected to generate 1.23 times more return on investment than Invesco SP. However, SPDR SSGA is 1.23 times more volatile than Invesco SP SmallCap. It trades about 0.07 of its potential returns per unit of risk. Invesco SP SmallCap is currently generating about 0.07 per unit of risk. If you would invest  10,195  in SPDR SSGA Small on August 31, 2024 and sell it today you would earn a total of  3,708  from holding SPDR SSGA Small or generate 36.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.73%
Values	Daily Returns

SPDR SSGA Small  vs.  Invesco SP SmallCap

SPDR SSGA Small

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SSGA Small are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal essential indicators, SPDR SSGA may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Invesco SP SmallCap

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco SP SmallCap are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal essential indicators, Invesco SP may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with SPDR SSGA and Invesco SP

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

The idea behind SPDR SSGA Small and Invesco SP SmallCap 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.