Correlation Between SPDR Portfolio and SPDR SP
Can any of the company-specific risk be diversified away by investing in both SPDR Portfolio and SPDR SP 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 Portfolio and SPDR SP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR Portfolio SP and SPDR SP 400, you can compare the effects of market volatilities on SPDR Portfolio and SPDR SP 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 Portfolio with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Portfolio and SPDR SP.
Diversification Opportunities for SPDR Portfolio and SPDR SP
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between SPDR and SPDR is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Portfolio SP and SPDR SP 400 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP 400 and SPDR Portfolio 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 Portfolio SP are associated (or correlated) with SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP 400 has no effect on the direction of SPDR Portfolio i.e., SPDR Portfolio and SPDR SP go up and down completely randomly.
Pair Corralation between SPDR Portfolio and SPDR SP
Given the investment horizon of 90 days SPDR Portfolio is expected to generate 1.81 times less return on investment than SPDR SP. But when comparing it to its historical volatility, SPDR Portfolio SP is 1.49 times less risky than SPDR SP. It trades about 0.16 of its potential returns per unit of risk. SPDR SP 400 is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 8,411 in SPDR SP 400 on September 2, 2024 and sell it today you would earn a total of 1,022 from holding SPDR SP 400 or generate 12.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR Portfolio SP vs. SPDR SP 400
Performance |
| Timeline |
| SPDR Portfolio SP |
| SPDR SP 400 |
SPDR Portfolio and SPDR SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR Portfolio and SPDR SP
The main advantage of trading using opposite SPDR Portfolio and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR Portfolio position performs unexpectedly, SPDR SP 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 SP will offset losses from the drop in SPDR SP's long position.| SPDR Portfolio vs. SPDR Portfolio SP | SPDR Portfolio vs. SPDR Portfolio SP | SPDR Portfolio vs. SPDR Portfolio SP | SPDR Portfolio vs. SPDR SP 600 |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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