Correlation Between SPDR Russell and SPDR SP
Can any of the company-specific risk be diversified away by investing in both SPDR Russell and SPDR SP 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 Russell and SPDR SP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR Russell 1000 and SPDR SP 400, you can compare the effects of market volatilities on SPDR Russell and SPDR SP 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 Russell with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Russell and SPDR SP.
Diversification Opportunities for SPDR Russell and SPDR SP
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between SPDR and SPDR is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Russell 1000 and SPDR SP 400 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP 400 and SPDR Russell 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 Russell 1000 are associated (or correlated) with SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP 400 has no effect on the direction of SPDR Russell i.e., SPDR Russell and SPDR SP go up and down completely randomly.
Pair Corralation between SPDR Russell and SPDR SP
Given the investment horizon of 90 days SPDR Russell is expected to generate 1.08 times less return on investment than SPDR SP. But when comparing it to its historical volatility, SPDR Russell 1000 is 1.26 times less risky than SPDR SP. It trades about 0.09 of its potential returns per unit of risk. SPDR SP 400 is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 6,699 in SPDR SP 400 on August 28, 2024 and sell it today you would earn a total of 2,018 from holding SPDR SP 400 or generate 30.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR Russell 1000 vs. SPDR SP 400
Performance |
| Timeline |
| SPDR Russell 1000 |
| SPDR SP 400 |
SPDR Russell and SPDR SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR Russell and SPDR SP
The main advantage of trading using opposite SPDR Russell and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR Russell position performs unexpectedly, SPDR SP 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 SPDR SP will offset losses from the drop in SPDR SP's long position.| SPDR Russell vs. SPDR Russell 1000 | SPDR Russell vs. SPDR MSCI USA | SPDR Russell vs. SPDR SP 400 | SPDR Russell vs. SPDR MSCI EAFE |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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