Correlation Between SPDR SP and FlexShares High
Can any of the company-specific risk be diversified away by investing in both SPDR SP and FlexShares High 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 FlexShares High 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 FlexShares High Yield, you can compare the effects of market volatilities on SPDR SP and FlexShares High 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 FlexShares High. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and FlexShares High.
Diversification Opportunities for SPDR SP and FlexShares High
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between SPDR and FlexShares is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP 500 and FlexShares High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FlexShares High Yield 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 FlexShares High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FlexShares High Yield has no effect on the direction of SPDR SP i.e., SPDR SP and FlexShares High go up and down completely randomly.
Pair Corralation between SPDR SP and FlexShares High
Considering the 90-day investment horizon SPDR SP 500 is expected to generate 3.5 times more return on investment than FlexShares High. However, SPDR SP is 3.5 times more volatile than FlexShares High Yield. It trades about 0.38 of its potential returns per unit of risk. FlexShares High Yield is currently generating about 0.4 per unit of risk. If you would invest 56,864 in SPDR SP 500 on September 1, 2024 and sell it today you would earn a total of 3,391 from holding SPDR SP 500 or generate 5.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
SPDR SP 500 vs. FlexShares High Yield
Performance |
| Timeline |
| SPDR SP 500 |
| FlexShares High Yield |
SPDR SP and FlexShares High Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR SP and FlexShares High
The main advantage of trading using opposite SPDR SP and FlexShares High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP position performs unexpectedly, FlexShares High 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 FlexShares High will offset losses from the drop in FlexShares High's long position.| SPDR SP vs. Vanguard Total Stock | SPDR SP vs. Vanguard FTSE Emerging | SPDR SP vs. FT Vest Equity | SPDR SP vs. Zillow Group Class |
| FlexShares High vs. Xtrackers High Beta | FlexShares High vs. iShares Edge High | FlexShares High vs. Xtrackers USD High | FlexShares High vs. iShares Interest Rate |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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