Correlation Between SPDR SP and Litman Gregory
Can any of the company-specific risk be diversified away by investing in both SPDR SP and Litman Gregory 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 Litman Gregory 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 Litman Gregory Funds, you can compare the effects of market volatilities on SPDR SP and Litman Gregory 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 Litman Gregory. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and Litman Gregory.
Diversification Opportunities for SPDR SP and Litman Gregory
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between SPDR and Litman is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP China and Litman Gregory Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Litman Gregory Funds 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 Litman Gregory. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Litman Gregory Funds has no effect on the direction of SPDR SP i.e., SPDR SP and Litman Gregory go up and down completely randomly.
Pair Corralation between SPDR SP and Litman Gregory
Considering the 90-day investment horizon SPDR SP China is expected to generate 0.99 times more return on investment than Litman Gregory. However, SPDR SP China is 1.01 times less risky than Litman Gregory. It trades about -0.12 of its potential returns per unit of risk. Litman Gregory Funds is currently generating about -0.12 per unit of risk. If you would invest 7,995 in SPDR SP China on August 25, 2024 and sell it today you would lose (451.00) from holding SPDR SP China or give up 5.64% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR SP China vs. Litman Gregory Funds
Performance |
| Timeline |
| SPDR SP China |
| Litman Gregory Funds |
SPDR SP and Litman Gregory Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR SP and Litman Gregory
The main advantage of trading using opposite SPDR SP and Litman Gregory positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP position performs unexpectedly, Litman Gregory 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 Litman Gregory will offset losses from the drop in Litman Gregory'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 |
| Litman Gregory vs. iShares MSCI Singapore | Litman Gregory vs. iShares MSCI Taiwan | Litman Gregory vs. iShares MSCI Malaysia | Litman Gregory vs. iShares MSCI Australia |
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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