Correlation Between SPDR Dow and X Square
Can any of the company-specific risk be diversified away by investing in both SPDR Dow and X Square 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 Dow and X Square into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR Dow Jones and X Square Balanced, you can compare the effects of market volatilities on SPDR Dow and X Square 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 Dow with a short position of X Square. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Dow and X Square.
Diversification Opportunities for SPDR Dow and X Square
Almost no diversification
The 3 months correlation between SPDR and SQBFX is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Dow Jones and X Square Balanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on X Square Balanced and SPDR Dow 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 Dow Jones are associated (or correlated) with X Square. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of X Square Balanced has no effect on the direction of SPDR Dow i.e., SPDR Dow and X Square go up and down completely randomly.
Pair Corralation between SPDR Dow and X Square
Considering the 90-day investment horizon SPDR Dow Jones is expected to generate 1.6 times more return on investment than X Square. However, SPDR Dow is 1.6 times more volatile than X Square Balanced. It trades about 0.27 of its potential returns per unit of risk. X Square Balanced is currently generating about 0.38 per unit of risk. If you would invest 42,381 in SPDR Dow Jones on August 28, 2024 and sell it today you would earn a total of 2,375 from holding SPDR Dow Jones or generate 5.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR Dow Jones vs. X Square Balanced
Performance |
| Timeline |
| SPDR Dow Jones |
| X Square Balanced |
SPDR Dow and X Square Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR Dow and X Square
The main advantage of trading using opposite SPDR Dow and X Square positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR Dow position performs unexpectedly, X Square 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 X Square will offset losses from the drop in X Square's long position.| SPDR Dow vs. iShares Russell 2000 | SPDR Dow vs. SPDR SP 500 | SPDR Dow vs. Financial Select Sector | SPDR Dow vs. Invesco QQQ Trust |
| X Square vs. Vanguard SP Mid Cap | X Square vs. SPDR Dow Jones | X Square vs. Energy Select Sector | X Square vs. Vanguard Growth Index |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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