Correlation Between SPDR SP and Two Roads

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Can any of the company-specific risk be diversified away by investing in both SPDR SP and Two Roads 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 Two Roads into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR SP MIDCAP and Two Roads Shared, you can compare the effects of market volatilities on SPDR SP and Two Roads 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 Two Roads. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and Two Roads.

Diversification Opportunities for SPDR SP and Two Roads

0.99
  Correlation Coefficient

No risk reduction

The 3 months correlation between SPDR and Two is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP MIDCAP and Two Roads Shared in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Two Roads Shared 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 MIDCAP are associated (or correlated) with Two Roads. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Two Roads Shared has no effect on the direction of SPDR SP i.e., SPDR SP and Two Roads go up and down completely randomly.

Pair Corralation between SPDR SP and Two Roads

Considering the 90-day investment horizon SPDR SP MIDCAP is expected to generate 0.83 times more return on investment than Two Roads. However, SPDR SP MIDCAP is 1.2 times less risky than Two Roads. It trades about 0.25 of its potential returns per unit of risk. Two Roads Shared is currently generating about 0.2 per unit of risk. If you would invest  57,110  in SPDR SP MIDCAP on August 25, 2024 and sell it today you would earn a total of  3,961  from holding SPDR SP MIDCAP or generate 6.94% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

SPDR SP MIDCAP  vs.  Two Roads Shared

 Performance 
       Timeline  
SPDR SP MIDCAP 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP MIDCAP are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, SPDR SP may actually be approaching a critical reversion point that can send shares even higher in December 2024.
Two Roads Shared 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Two Roads Shared are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating technical and fundamental indicators, Two Roads may actually be approaching a critical reversion point that can send shares even higher in December 2024.

SPDR SP and Two Roads Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with SPDR SP and Two Roads

The main advantage of trading using opposite SPDR SP and Two Roads positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP position performs unexpectedly, Two Roads 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 Two Roads will offset losses from the drop in Two Roads' long position.
The idea behind SPDR SP MIDCAP and Two Roads Shared pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.

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