Correlation Between SPDR Dow and Fundamental Income
Can any of the company-specific risk be diversified away by investing in both SPDR Dow and Fundamental 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 SPDR Dow and Fundamental Income into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR Dow Jones and Fundamental Income Net, you can compare the effects of market volatilities on SPDR Dow and Fundamental 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 SPDR Dow with a short position of Fundamental Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Dow and Fundamental Income.
Diversification Opportunities for SPDR Dow and Fundamental Income
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between SPDR and Fundamental is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Dow Jones and Fundamental Income Net in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fundamental Income Net and SPDR Dow 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 Dow Jones are associated (or correlated) with Fundamental Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fundamental Income Net has no effect on the direction of SPDR Dow i.e., SPDR Dow and Fundamental Income go up and down completely randomly.
Pair Corralation between SPDR Dow and Fundamental Income
Considering the 90-day investment horizon SPDR Dow Jones is expected to generate 1.0 times more return on investment than Fundamental Income. However, SPDR Dow is 1.0 times more volatile than Fundamental Income Net. It trades about 0.04 of its potential returns per unit of risk. Fundamental Income Net is currently generating about 0.03 per unit of risk. If you would invest 8,205 in SPDR Dow Jones on December 31, 2024 and sell it today you would earn a total of 1,707 from holding SPDR Dow Jones or generate 20.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR Dow Jones vs. Fundamental Income Net
Performance |
| Timeline |
| SPDR Dow Jones |
| Fundamental Income Net |
SPDR Dow and Fundamental Income Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR Dow and Fundamental Income
The main advantage of trading using opposite SPDR Dow and Fundamental Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR Dow position performs unexpectedly, Fundamental 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 Fundamental Income will offset losses from the drop in Fundamental Income's long position.| SPDR Dow vs. iShares Cohen Steers | ||
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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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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