Correlation Between SPDR SP and SPDR SSGA
Can any of the company-specific risk be diversified away by investing in both SPDR SP and SPDR SSGA 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 SPDR SSGA 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 SPDR SSGA Sector, you can compare the effects of market volatilities on SPDR SP and SPDR SSGA 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 SPDR SSGA. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and SPDR SSGA.
Diversification Opportunities for SPDR SP and SPDR SSGA
No risk reduction
The 3 months correlation between SPDR and SPDR is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP 500 and SPDR SSGA Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SSGA Sector 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 SPDR SSGA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SSGA Sector has no effect on the direction of SPDR SP i.e., SPDR SP and SPDR SSGA go up and down completely randomly.
Pair Corralation between SPDR SP and SPDR SSGA
Considering the 90-day investment horizon SPDR SP 500 is expected to generate 0.92 times more return on investment than SPDR SSGA. However, SPDR SP 500 is 1.09 times less risky than SPDR SSGA. It trades about 0.15 of its potential returns per unit of risk. SPDR SSGA Sector is currently generating about 0.11 per unit of risk. If you would invest 45,297 in SPDR SP 500 on August 27, 2024 and sell it today you would earn a total of 14,254 from holding SPDR SP 500 or generate 31.47% 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. SPDR SSGA Sector
Performance |
| Timeline |
| SPDR SP 500 |
| SPDR SSGA Sector |
SPDR SP and SPDR SSGA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR SP and SPDR SSGA
The main advantage of trading using opposite SPDR SP and SPDR SSGA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP position performs unexpectedly, SPDR SSGA 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 SSGA will offset losses from the drop in SPDR SSGA'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 |
| SPDR SSGA vs. Morningstar Unconstrained Allocation | SPDR SSGA vs. High Yield Municipal Fund | SPDR SSGA vs. Via Renewables | SPDR SSGA vs. Knife River |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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