Correlation Between SPDR SP and Advisors Asset
Can any of the company-specific risk be diversified away by investing in both SPDR SP and Advisors Asset 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 Advisors Asset 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 Advisors Asset Management, you can compare the effects of market volatilities on SPDR SP and Advisors Asset 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 Advisors Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and Advisors Asset.
Diversification Opportunities for SPDR SP and Advisors Asset
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SPDR and Advisors is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP 500 and Advisors Asset Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advisors Asset Management 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 Advisors Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advisors Asset Management has no effect on the direction of SPDR SP i.e., SPDR SP and Advisors Asset go up and down completely randomly.
Pair Corralation between SPDR SP and Advisors Asset
Considering the 90-day investment horizon SPDR SP 500 is expected to generate 1.06 times more return on investment than Advisors Asset. However, SPDR SP is 1.06 times more volatile than Advisors Asset Management. It trades about 0.14 of its potential returns per unit of risk. Advisors Asset Management is currently generating about 0.07 per unit of risk. If you would invest 46,756 in SPDR SP 500 on September 12, 2024 and sell it today you would earn a total of 13,994 from holding SPDR SP 500 or generate 29.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 85.48% |
| Values | Daily Returns |
SPDR SP 500 vs. Advisors Asset Management
Performance |
| Timeline |
| SPDR SP 500 |
| Advisors Asset Management |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
SPDR SP and Advisors Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR SP and Advisors Asset
The main advantage of trading using opposite SPDR SP and Advisors Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP position performs unexpectedly, Advisors Asset 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 Advisors Asset will offset losses from the drop in Advisors Asset's long position.| SPDR SP vs. SPDR Nuveen Municipal | SPDR SP vs. SPDR SP 400 | SPDR SP vs. SPDR SP 400 | SPDR SP vs. SPDR Bloomberg Emerging |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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