Correlation Between Australian High and SPDR SPASX
Can any of the company-specific risk be diversified away by investing in both Australian High and SPDR SPASX 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 Australian High and SPDR SPASX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Australian High Interest and SPDR SPASX 50, you can compare the effects of market volatilities on Australian High and SPDR SPASX 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 Australian High with a short position of SPDR SPASX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australian High and SPDR SPASX.
Diversification Opportunities for Australian High and SPDR SPASX
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Australian and SPDR is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Australian High Interest and SPDR SPASX 50 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SPASX 50 and Australian High 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 Australian High Interest are associated (or correlated) with SPDR SPASX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SPASX 50 has no effect on the direction of Australian High i.e., Australian High and SPDR SPASX go up and down completely randomly.
Pair Corralation between Australian High and SPDR SPASX
Assuming the 90 days trading horizon Australian High is expected to generate 5.29 times less return on investment than SPDR SPASX. But when comparing it to its historical volatility, Australian High Interest is 39.25 times less risky than SPDR SPASX. It trades about 0.87 of its potential returns per unit of risk. SPDR SPASX 50 is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 7,302 in SPDR SPASX 50 on August 29, 2024 and sell it today you would earn a total of 136.00 from holding SPDR SPASX 50 or generate 1.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Australian High Interest vs. SPDR SPASX 50
Performance |
| Timeline |
| Australian High Interest |
| SPDR SPASX 50 |
Australian High and SPDR SPASX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Australian High and SPDR SPASX
The main advantage of trading using opposite Australian High and SPDR SPASX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Australian High position performs unexpectedly, SPDR SPASX 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 SPASX will offset losses from the drop in SPDR SPASX's long position.The idea behind Australian High Interest and SPDR SPASX 50 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.| SPDR SPASX vs. SPDR SP 500 | SPDR SPASX vs. Vanguard Total Market | SPDR SPASX vs. iShares Core SP | SPDR SPASX vs. iShares Core SP |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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