Correlation Between Snap and S P
Can any of the company-specific risk be diversified away by investing in both Snap and S P 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 S P into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Snap Inc and S P V, you can compare the effects of market volatilities on Snap and S P 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 S P. Check out your portfolio center. Please also check ongoing floating volatility patterns of Snap and S P.
Diversification Opportunities for Snap and S P
Good diversification
The 3 months correlation between Snap and SPVI is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Snap Inc and S P V in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on S P V 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 S P. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of S P V has no effect on the direction of Snap i.e., Snap and S P go up and down completely randomly.
Pair Corralation between Snap and S P
Given the investment horizon of 90 days Snap is expected to generate 33.18 times less return on investment than S P. But when comparing it to its historical volatility, Snap Inc is 38.75 times less risky than S P. It trades about 0.13 of its potential returns per unit of risk. S P V is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 276.00 in S P V on August 28, 2024 and sell it today you would lose (54.00) from holding S P V or give up 19.57% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.44% |
| Values | Daily Returns |
Snap Inc vs. S P V
Performance |
| Timeline |
| Snap Inc |
| S P V |
Snap and S P Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Snap and S P
The main advantage of trading using opposite Snap and S P positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Snap position performs unexpectedly, S P 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 S P will offset losses from the drop in S P's long position.The idea behind Snap Inc and S P V 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.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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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