Correlation Between Snap and SPDR SP
Can any of the company-specific risk be diversified away by investing in both Snap and SPDR SP 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 SP 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 SP Insurance, you can compare the effects of market volatilities on Snap and SPDR SP 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 SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Snap and SPDR SP.
Diversification Opportunities for Snap and SPDR SP
Weak diversification
The 3 months correlation between Snap and SPDR is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Snap Inc and SPDR SP Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Insurance 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 SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP Insurance has no effect on the direction of Snap i.e., Snap and SPDR SP go up and down completely randomly.
Pair Corralation between Snap and SPDR SP
Given the investment horizon of 90 days Snap Inc is expected to generate 3.48 times more return on investment than SPDR SP. However, Snap is 3.48 times more volatile than SPDR SP Insurance. It trades about 0.12 of its potential returns per unit of risk. SPDR SP Insurance is currently generating about 0.21 per unit of risk. If you would invest 1,027 in Snap Inc on August 25, 2024 and sell it today you would earn a total of 115.00 from holding Snap Inc or generate 11.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Snap Inc vs. SPDR SP Insurance
Performance |
| Timeline |
| Snap Inc |
| SPDR SP Insurance |
Snap and SPDR SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Snap and SPDR SP
The main advantage of trading using opposite Snap and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Snap position performs unexpectedly, SPDR SP 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 SP will offset losses from the drop in SPDR SP's long position.The idea behind Snap Inc and SPDR SP Insurance 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 SP vs. SPDR SP Capital | SPDR SP vs. iShares Insurance ETF | SPDR SP vs. SPDR SP Bank | SPDR SP vs. iShares Broker Dealers Securities |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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