Correlation Between SPDR SSGA and Dow Jones
Can any of the company-specific risk be diversified away by investing in both SPDR SSGA and Dow Jones 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 SSGA and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR SSGA Small and Dow Jones Industrial, you can compare the effects of market volatilities on SPDR SSGA and Dow Jones 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 SSGA with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SSGA and Dow Jones.
Diversification Opportunities for SPDR SSGA and Dow Jones
Very poor diversification
The 3 months correlation between SPDR and Dow is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SSGA Small and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial and SPDR SSGA 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 SSGA Small are associated (or correlated) with Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of SPDR SSGA i.e., SPDR SSGA and Dow Jones go up and down completely randomly.
Pair Corralation between SPDR SSGA and Dow Jones
Given the investment horizon of 90 days SPDR SSGA Small is expected to generate 2.36 times more return on investment than Dow Jones. However, SPDR SSGA is 2.36 times more volatile than Dow Jones Industrial. It trades about 0.2 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.27 per unit of risk. If you would invest 12,676 in SPDR SSGA Small on August 29, 2024 and sell it today you would earn a total of 1,288 from holding SPDR SSGA Small or generate 10.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR SSGA Small vs. Dow Jones Industrial
Performance |
| Timeline |
SPDR SSGA and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
SPDR SSGA Small
Pair trading matchups for SPDR SSGA
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with SPDR SSGA and Dow Jones
The main advantage of trading using opposite SPDR SSGA and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SSGA position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| SPDR SSGA vs. SPDR SSGA Large | SPDR SSGA vs. Invesco SP SmallCap | SPDR SSGA vs. Invesco SP MidCap | SPDR SSGA vs. SPDR MSCI EAFE |
| Dow Jones vs. CECO Environmental Corp | Dow Jones vs. Western Acquisition Ventures | Dow Jones vs. Tyson Foods | Dow Jones vs. Inflection Point Acquisition |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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