Correlation Between SPDR Galaxy and Dow Jones
Can any of the company-specific risk be diversified away by investing in both SPDR Galaxy and Dow Jones 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 Galaxy and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR Galaxy Hedged and Dow Jones Industrial, you can compare the effects of market volatilities on SPDR Galaxy and Dow Jones 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 Galaxy with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Galaxy and Dow Jones.
Diversification Opportunities for SPDR Galaxy and Dow Jones
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SPDR and Dow is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Galaxy Hedged and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial and SPDR Galaxy 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 Galaxy Hedged are associated (or correlated) with Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of SPDR Galaxy i.e., SPDR Galaxy and Dow Jones go up and down completely randomly.
Pair Corralation between SPDR Galaxy and Dow Jones
Given the investment horizon of 90 days SPDR Galaxy Hedged is expected to generate 4.44 times more return on investment than Dow Jones. However, SPDR Galaxy is 4.44 times more volatile than Dow Jones Industrial. It trades about 0.12 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.15 per unit of risk. If you would invest 2,465 in SPDR Galaxy Hedged on November 3, 2024 and sell it today you would earn a total of 1,062 from holding SPDR Galaxy Hedged or generate 43.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 79.2% |
| Values | Daily Returns |
SPDR Galaxy Hedged vs. Dow Jones Industrial
Performance |
| Timeline |
SPDR Galaxy and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
SPDR Galaxy Hedged
Pair trading matchups for SPDR Galaxy
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with SPDR Galaxy and Dow Jones
The main advantage of trading using opposite SPDR Galaxy and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR Galaxy position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| SPDR Galaxy vs. iShares Dividend and | SPDR Galaxy vs. Martin Currie Sustainable | SPDR Galaxy vs. VictoryShares THB Mid | SPDR Galaxy vs. Mast Global Battery |
| Dow Jones vs. Cincinnati Financial | Dow Jones vs. Kellanova | Dow Jones vs. Acme United | Dow Jones vs. Procter Gamble |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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