Correlation Between Snap and SPDR Dow
Can any of the company-specific risk be diversified away by investing in both Snap and SPDR Dow 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 Snap and SPDR Dow into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Snap Inc and SPDR Dow Jones, you can compare the effects of market volatilities on Snap and SPDR Dow 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 Snap with a short position of SPDR Dow. Check out your portfolio center. Please also check ongoing floating volatility patterns of Snap and SPDR Dow.
Diversification Opportunities for Snap and SPDR Dow
Very good diversification
The 3 months correlation between Snap and SPDR is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Snap Inc and SPDR Dow Jones in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Dow Jones and Snap 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 Snap Inc are associated (or correlated) with SPDR Dow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Dow Jones has no effect on the direction of Snap i.e., Snap and SPDR Dow go up and down completely randomly.
Pair Corralation between Snap and SPDR Dow
Given the investment horizon of 90 days Snap Inc is expected to generate 4.82 times more return on investment than SPDR Dow. However, Snap is 4.82 times more volatile than SPDR Dow Jones. It trades about 0.06 of its potential returns per unit of risk. SPDR Dow Jones is currently generating about -0.09 per unit of risk. If you would invest 1,087 in Snap Inc on August 28, 2024 and sell it today you would earn a total of 73.00 from holding Snap Inc or generate 6.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Snap Inc vs. SPDR Dow Jones
Performance |
| Timeline |
| Snap Inc |
| SPDR Dow Jones |
Snap and SPDR Dow Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Snap and SPDR Dow
The main advantage of trading using opposite Snap and SPDR Dow positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Snap position performs unexpectedly, SPDR Dow 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 Dow will offset losses from the drop in SPDR Dow's long position.The idea behind Snap Inc and SPDR Dow Jones 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 Dow vs. Vanguard FTSE Developed | SPDR Dow vs. Leverage Shares 2x | SPDR Dow vs. Amundi Index Solutions | SPDR Dow vs. Amundi Index Solutions |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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