Correlation Between SPDR SP and CHIX
Can any of the company-specific risk be diversified away by investing in both SPDR SP and CHIX 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 SP and CHIX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR SP China and CHIX, you can compare the effects of market volatilities on SPDR SP and CHIX 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 SP with a short position of CHIX. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and CHIX.
Diversification Opportunities for SPDR SP and CHIX
Excellent diversification
The 3 months correlation between SPDR and CHIX is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP China and CHIX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHIX and SPDR SP 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 SP China are associated (or correlated) with CHIX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHIX has no effect on the direction of SPDR SP i.e., SPDR SP and CHIX go up and down completely randomly.
Pair Corralation between SPDR SP and CHIX
Considering the 90-day investment horizon SPDR SP China is expected to generate 1.26 times more return on investment than CHIX. However, SPDR SP is 1.26 times more volatile than CHIX. It trades about 0.01 of its potential returns per unit of risk. CHIX is currently generating about 0.01 per unit of risk. If you would invest 7,455 in SPDR SP China on August 24, 2024 and sell it today you would earn a total of 89.00 from holding SPDR SP China or generate 1.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 32.06% |
| Values | Daily Returns |
SPDR SP China vs. CHIX
Performance |
| Timeline |
| SPDR SP China |
| CHIX |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
SPDR SP and CHIX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR SP and CHIX
The main advantage of trading using opposite SPDR SP and CHIX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP position performs unexpectedly, CHIX 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 CHIX will offset losses from the drop in CHIX's long position.| SPDR SP vs. Invesco Golden Dragon | SPDR SP vs. iShares MSCI Hong | SPDR SP vs. iShares MSCI China | SPDR SP vs. iShares China Large Cap |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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