Correlation Between FT Cboe and SPDR SP

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Can any of the company-specific risk be diversified away by investing in both FT Cboe 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 FT Cboe and SPDR SP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FT Cboe Vest and SPDR SP 500, you can compare the effects of market volatilities on FT Cboe 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 FT Cboe with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of FT Cboe and SPDR SP.

Diversification Opportunities for FT Cboe and SPDR SP

1.0
  Correlation Coefficient

No risk reduction

The 3 months correlation between DJUL and SPDR is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding FT Cboe Vest and SPDR SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP 500 and FT Cboe 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 FT Cboe Vest 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 500 has no effect on the direction of FT Cboe i.e., FT Cboe and SPDR SP go up and down completely randomly.

Pair Corralation between FT Cboe and SPDR SP

Given the investment horizon of 90 days FT Cboe is expected to generate 1.51 times less return on investment than SPDR SP. But when comparing it to its historical volatility, FT Cboe Vest is 1.72 times less risky than SPDR SP. It trades about 0.14 of its potential returns per unit of risk. SPDR SP 500 is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  37,448  in SPDR SP 500 on August 26, 2024 and sell it today you would earn a total of  22,103  from holding SPDR SP 500 or generate 59.02% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

FT Cboe Vest  vs.  SPDR SP 500

 Performance 
       Timeline  
FT Cboe Vest 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in FT Cboe Vest are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, FT Cboe is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.
SPDR SP 500 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP 500 are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, SPDR SP is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

FT Cboe and SPDR SP Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with FT Cboe and SPDR SP

The main advantage of trading using opposite FT Cboe and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FT Cboe 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.
The idea behind FT Cboe Vest and SPDR SP 500 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.

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