Correlation Between Sp 500 and Short-term Income
Can any of the company-specific risk be diversified away by investing in both Sp 500 and Short-term Income 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 Sp 500 and Short-term Income into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sp 500 Equal and Short Term Income Fund, you can compare the effects of market volatilities on Sp 500 and Short-term Income 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 Sp 500 with a short position of Short-term Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sp 500 and Short-term Income.
Diversification Opportunities for Sp 500 and Short-term Income
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between INDEX and Short-term is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Sp 500 Equal and Short Term Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Short Term Income and Sp 500 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 Sp 500 Equal are associated (or correlated) with Short-term Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Short Term Income has no effect on the direction of Sp 500 i.e., Sp 500 and Short-term Income go up and down completely randomly.
Pair Corralation between Sp 500 and Short-term Income
Assuming the 90 days horizon Sp 500 Equal is expected to generate 20.2 times more return on investment than Short-term Income. However, Sp 500 is 20.2 times more volatile than Short Term Income Fund. It trades about 0.2 of its potential returns per unit of risk. Short Term Income Fund is currently generating about 0.53 per unit of risk. If you would invest 5,550 in Sp 500 Equal on August 31, 2024 and sell it today you would earn a total of 213.00 from holding Sp 500 Equal or generate 3.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sp 500 Equal vs. Short Term Income Fund
Performance |
| Timeline |
| Sp 500 Equal |
| Short Term Income |
Sp 500 and Short-term Income Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sp 500 and Short-term Income
The main advantage of trading using opposite Sp 500 and Short-term Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sp 500 position performs unexpectedly, Short-term Income 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 Short-term Income will offset losses from the drop in Short-term Income's long position.| Sp 500 vs. Franklin Real Estate | Sp 500 vs. Jhancock Real Estate | Sp 500 vs. Amg Managers Centersquare | Sp 500 vs. Us Real Estate |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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