Correlation Between SPDR SP and Dimensional Sustainability
Can any of the company-specific risk be diversified away by investing in both SPDR SP and Dimensional Sustainability 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 SP and Dimensional Sustainability into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR SP 500 and Dimensional Sustainability Core, you can compare the effects of market volatilities on SPDR SP and Dimensional Sustainability 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 SP with a short position of Dimensional Sustainability. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and Dimensional Sustainability.
Diversification Opportunities for SPDR SP and Dimensional Sustainability
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between SPDR and Dimensional is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP 500 and Dimensional Sustainability Cor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimensional Sustainability and SPDR SP 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 SP 500 are associated (or correlated) with Dimensional Sustainability. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimensional Sustainability has no effect on the direction of SPDR SP i.e., SPDR SP and Dimensional Sustainability go up and down completely randomly.
Pair Corralation between SPDR SP and Dimensional Sustainability
Considering the 90-day investment horizon SPDR SP is expected to generate 1.01 times less return on investment than Dimensional Sustainability. But when comparing it to its historical volatility, SPDR SP 500 is 1.08 times less risky than Dimensional Sustainability. It trades about 0.12 of its potential returns per unit of risk. Dimensional Sustainability Core is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 2,903 in Dimensional Sustainability Core on August 26, 2024 and sell it today you would earn a total of 1,004 from holding Dimensional Sustainability Core or generate 34.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR SP 500 vs. Dimensional Sustainability Cor
Performance |
| Timeline |
| SPDR SP 500 |
| Dimensional Sustainability |
SPDR SP and Dimensional Sustainability Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR SP and Dimensional Sustainability
The main advantage of trading using opposite SPDR SP and Dimensional Sustainability positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP position performs unexpectedly, Dimensional Sustainability 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 Dimensional Sustainability will offset losses from the drop in Dimensional Sustainability's long position.| SPDR SP vs. FT Vest Equity | SPDR SP vs. Northern Lights | SPDR SP vs. Dimensional International High | SPDR SP vs. First Trust Exchange Traded |
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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