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 Pharmaceuticals, 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
Poor diversification
The 3 months correlation between Snap and SPDR is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Snap Inc and SPDR SP Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Pharmaceuticals 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 Pharmaceuticals 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 under-perform the SPDR SP. In addition to that, Snap is 2.57 times more volatile than SPDR SP Pharmaceuticals. It trades about -0.03 of its total potential returns per unit of risk. SPDR SP Pharmaceuticals is currently generating about 0.02 per unit of volatility. If you would invest 4,600 in SPDR SP Pharmaceuticals on September 1, 2024 and sell it today you would earn a total of 19.00 from holding SPDR SP Pharmaceuticals or generate 0.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Snap Inc vs. SPDR SP Pharmaceuticals
Performance |
| Timeline |
| Snap Inc |
| SPDR SP Pharmaceuticals |
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 Pharmaceuticals 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. iShares Pharmaceuticals ETF | SPDR SP vs. Invesco Dynamic Pharmaceuticals | SPDR SP vs. SPDR SP Health | SPDR SP vs. SPDR SP Health |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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