Correlation Between FlexShares Quality and SPDR SSGA
Can any of the company-specific risk be diversified away by investing in both FlexShares Quality and SPDR SSGA 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 FlexShares Quality and SPDR SSGA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FlexShares Quality Dividend and SPDR SSGA Large, you can compare the effects of market volatilities on FlexShares Quality and SPDR SSGA 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 FlexShares Quality with a short position of SPDR SSGA. Check out your portfolio center. Please also check ongoing floating volatility patterns of FlexShares Quality and SPDR SSGA.
Diversification Opportunities for FlexShares Quality and SPDR SSGA
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between FlexShares and SPDR is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding FlexShares Quality Dividend and SPDR SSGA Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SSGA Large and FlexShares Quality 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 FlexShares Quality Dividend are associated (or correlated) with SPDR SSGA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SSGA Large has no effect on the direction of FlexShares Quality i.e., FlexShares Quality and SPDR SSGA go up and down completely randomly.
Pair Corralation between FlexShares Quality and SPDR SSGA
Given the investment horizon of 90 days FlexShares Quality Dividend is expected to generate 1.07 times more return on investment than SPDR SSGA. However, FlexShares Quality is 1.07 times more volatile than SPDR SSGA Large. It trades about 0.15 of its potential returns per unit of risk. SPDR SSGA Large is currently generating about 0.12 per unit of risk. If you would invest 5,176 in FlexShares Quality Dividend on September 2, 2024 and sell it today you would earn a total of 2,195 from holding FlexShares Quality Dividend or generate 42.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
FlexShares Quality Dividend vs. SPDR SSGA Large
Performance |
| Timeline |
| FlexShares Quality |
| SPDR SSGA Large |
FlexShares Quality and SPDR SSGA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FlexShares Quality and SPDR SSGA
The main advantage of trading using opposite FlexShares Quality and SPDR SSGA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FlexShares Quality position performs unexpectedly, SPDR SSGA 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 SSGA will offset losses from the drop in SPDR SSGA's long position.The idea behind FlexShares Quality Dividend and SPDR SSGA Large 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.
| SPDR SSGA vs. SPDR SSGA Small | SPDR SSGA vs. SPDR MSCI USA | SPDR SSGA vs. Invesco SP MidCap | SPDR SSGA vs. Invesco SP SmallCap |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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