Correlation Between SPDR SP and IQ Large
Can any of the company-specific risk be diversified away by investing in both SPDR SP and IQ Large 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 IQ Large 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 IQ Large Cap, you can compare the effects of market volatilities on SPDR SP and IQ Large 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 IQ Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and IQ Large.
Diversification Opportunities for SPDR SP and IQ Large
Almost no diversification
The 3 months correlation between SPDR and LRND is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP 500 and IQ Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IQ Large Cap 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 IQ Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IQ Large Cap has no effect on the direction of SPDR SP i.e., SPDR SP and IQ Large go up and down completely randomly.
Pair Corralation between SPDR SP and IQ Large
Considering the 90-day investment horizon SPDR SP 500 is expected to generate 0.85 times more return on investment than IQ Large. However, SPDR SP 500 is 1.18 times less risky than IQ Large. It trades about 0.18 of its potential returns per unit of risk. IQ Large Cap is currently generating about 0.14 per unit of risk. If you would invest 41,262 in SPDR SP 500 on August 26, 2024 and sell it today you would earn a total of 18,289 from holding SPDR SP 500 or generate 44.32% 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. IQ Large Cap
Performance |
| Timeline |
| SPDR SP 500 |
| IQ Large Cap |
SPDR SP and IQ Large Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR SP and IQ Large
The main advantage of trading using opposite SPDR SP and IQ Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP position performs unexpectedly, IQ Large 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 IQ Large will offset losses from the drop in IQ Large'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 |
| IQ Large vs. FT Vest Equity | IQ Large vs. Northern Lights | IQ Large vs. Dimensional International High | IQ Large 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 Global Correlations module to find global opportunities by holding instruments from different markets.
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