Correlation Between SPDR SP and BlackRock Future
Can any of the company-specific risk be diversified away by investing in both SPDR SP and BlackRock Future 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 BlackRock Future into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR SP 400 and BlackRock Future Health, you can compare the effects of market volatilities on SPDR SP and BlackRock Future 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 BlackRock Future. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and BlackRock Future.
Diversification Opportunities for SPDR SP and BlackRock Future
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between SPDR and BlackRock is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP 400 and BlackRock Future Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlackRock Future Health 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 400 are associated (or correlated) with BlackRock Future. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BlackRock Future Health has no effect on the direction of SPDR SP i.e., SPDR SP and BlackRock Future go up and down completely randomly.
Pair Corralation between SPDR SP and BlackRock Future
Given the investment horizon of 90 days SPDR SP 400 is expected to generate 1.01 times more return on investment than BlackRock Future. However, SPDR SP is 1.01 times more volatile than BlackRock Future Health. It trades about 0.34 of its potential returns per unit of risk. BlackRock Future Health is currently generating about 0.07 per unit of risk. If you would invest 8,687 in SPDR SP 400 on September 2, 2024 and sell it today you would earn a total of 746.00 from holding SPDR SP 400 or generate 8.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR SP 400 vs. BlackRock Future Health
Performance |
| Timeline |
| SPDR SP 400 |
| BlackRock Future Health |
SPDR SP and BlackRock Future Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR SP and BlackRock Future
The main advantage of trading using opposite SPDR SP and BlackRock Future positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP position performs unexpectedly, BlackRock Future 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 BlackRock Future will offset losses from the drop in BlackRock Future's long position.The idea behind SPDR SP 400 and BlackRock Future Health 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.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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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