Correlation Between Avantis Small and SPDR SP
Can any of the company-specific risk be diversified away by investing in both Avantis Small 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 Avantis Small and SPDR SP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Avantis Small Cap and SPDR SP 400, you can compare the effects of market volatilities on Avantis Small 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 Avantis Small with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avantis Small and SPDR SP.
Diversification Opportunities for Avantis Small and SPDR SP
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Avantis and SPDR is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Avantis Small Cap and SPDR SP 400 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP 400 and Avantis Small 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 Avantis Small Cap 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 400 has no effect on the direction of Avantis Small i.e., Avantis Small and SPDR SP go up and down completely randomly.
Pair Corralation between Avantis Small and SPDR SP
Given the investment horizon of 90 days Avantis Small Cap is expected to under-perform the SPDR SP. In addition to that, Avantis Small is 1.2 times more volatile than SPDR SP 400. It trades about -0.06 of its total potential returns per unit of risk. SPDR SP 400 is currently generating about 0.01 per unit of volatility. If you would invest 8,285 in SPDR SP 400 on September 18, 2024 and sell it today you would earn a total of 8.00 from holding SPDR SP 400 or generate 0.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Avantis Small Cap vs. SPDR SP 400
Performance |
| Timeline |
| Avantis Small Cap |
| SPDR SP 400 |
Avantis Small and SPDR SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Avantis Small and SPDR SP
The main advantage of trading using opposite Avantis Small and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avantis Small 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.| Avantis Small vs. FT Vest Equity | Avantis Small vs. Northern Lights | Avantis Small vs. Dimensional International High | Avantis Small vs. JPMorgan Fundamental Data |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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