Correlation Between SPDR SP and Royce Quant
Can any of the company-specific risk be diversified away by investing in both SPDR SP and Royce Quant 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 Royce Quant into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR SP 600 and Royce Quant Small Cap, you can compare the effects of market volatilities on SPDR SP and Royce Quant 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 Royce Quant. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and Royce Quant.
Diversification Opportunities for SPDR SP and Royce Quant
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between SPDR and Royce is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP 600 and Royce Quant Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royce Quant Small 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 600 are associated (or correlated) with Royce Quant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royce Quant Small has no effect on the direction of SPDR SP i.e., SPDR SP and Royce Quant go up and down completely randomly.
Pair Corralation between SPDR SP and Royce Quant
Given the investment horizon of 90 days SPDR SP 600 is expected to generate 1.07 times more return on investment than Royce Quant. However, SPDR SP is 1.07 times more volatile than Royce Quant Small Cap. It trades about 0.06 of its potential returns per unit of risk. Royce Quant Small Cap is currently generating about 0.06 per unit of risk. If you would invest 7,384 in SPDR SP 600 on August 29, 2024 and sell it today you would earn a total of 2,056 from holding SPDR SP 600 or generate 27.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR SP 600 vs. Royce Quant Small Cap
Performance |
| Timeline |
| SPDR SP 600 |
| Royce Quant Small |
SPDR SP and Royce Quant Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR SP and Royce Quant
The main advantage of trading using opposite SPDR SP and Royce Quant positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP position performs unexpectedly, Royce Quant 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 Royce Quant will offset losses from the drop in Royce Quant's long position.| SPDR SP vs. Dimensional ETF Trust | SPDR SP vs. Vanguard Small Cap Index | SPDR SP vs. First Trust Multi Manager | SPDR SP vs. Vanguard SP Small Cap |
| Royce Quant vs. First Trust Equity | Royce Quant vs. First Trust Small | Royce Quant vs. ClearBridge Dividend Strategy | Royce Quant vs. Principal Quality ETF |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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