Correlation Between SPDR Dow and LG Clean
Can any of the company-specific risk be diversified away by investing in both SPDR Dow and LG Clean 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 LG Clean 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 LG Clean Water, you can compare the effects of market volatilities on SPDR Dow and LG Clean 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 LG Clean. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Dow and LG Clean.
Diversification Opportunities for SPDR Dow and LG Clean
Very weak diversification
The 3 months correlation between SPDR and GLUG is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Dow Jones and LG Clean Water in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Clean Water 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 LG Clean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LG Clean Water has no effect on the direction of SPDR Dow i.e., SPDR Dow and LG Clean go up and down completely randomly.
Pair Corralation between SPDR Dow and LG Clean
Assuming the 90 days trading horizon SPDR Dow is expected to generate 1.34 times less return on investment than LG Clean. In addition to that, SPDR Dow is 1.34 times more volatile than LG Clean Water. It trades about 0.14 of its total potential returns per unit of risk. LG Clean Water is currently generating about 0.25 per unit of volatility. If you would invest 1,585 in LG Clean Water on October 29, 2024 and sell it today you would earn a total of 45.00 from holding LG Clean Water or generate 2.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 94.44% |
| Values | Daily Returns |
SPDR Dow Jones vs. LG Clean Water
Performance |
| Timeline |
| SPDR Dow Jones |
| LG Clean Water |
SPDR Dow and LG Clean Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR Dow and LG Clean
The main advantage of trading using opposite SPDR Dow and LG Clean positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR Dow position performs unexpectedly, LG Clean 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 LG Clean will offset losses from the drop in LG Clean's long position.| SPDR Dow vs. SPDR MSCI Europe | SPDR Dow vs. SPDR SP Utilities | SPDR Dow vs. SPDR MSCI Europe | SPDR Dow vs. SPDR MSCI EM |
| LG Clean vs. Vanguard FTSE Emerging | LG Clean vs. UBS ETF MSCI | LG Clean vs. VanEck Solana ETN | LG Clean vs. iShares Corp Bond |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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