Correlation Between Sp 500 and World Growth
Can any of the company-specific risk be diversified away by investing in both Sp 500 and World Growth 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 Sp 500 and World Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sp 500 Index and World Growth Fund, you can compare the effects of market volatilities on Sp 500 and World Growth 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 Sp 500 with a short position of World Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sp 500 and World Growth.
Diversification Opportunities for Sp 500 and World Growth
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between USSPX and World is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Sp 500 Index and World Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on World Growth and Sp 500 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 Sp 500 Index are associated (or correlated) with World Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of World Growth has no effect on the direction of Sp 500 i.e., Sp 500 and World Growth go up and down completely randomly.
Pair Corralation between Sp 500 and World Growth
Assuming the 90 days horizon Sp 500 Index is expected to generate 1.02 times more return on investment than World Growth. However, Sp 500 is 1.02 times more volatile than World Growth Fund. It trades about 0.1 of its potential returns per unit of risk. World Growth Fund is currently generating about 0.08 per unit of risk. If you would invest 5,148 in Sp 500 Index on November 2, 2024 and sell it today you would earn a total of 2,436 from holding Sp 500 Index or generate 47.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sp 500 Index vs. World Growth Fund
Performance |
| Timeline |
| Sp 500 Index |
| World Growth |
Sp 500 and World Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sp 500 and World Growth
The main advantage of trading using opposite Sp 500 and World Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sp 500 position performs unexpectedly, World Growth 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 World Growth will offset losses from the drop in World Growth's long position.| Sp 500 vs. Nasdaq 100 Index Fund | Sp 500 vs. International Fund International | Sp 500 vs. Science Technology Fund | Sp 500 vs. Aggressive Growth Fund |
| World Growth vs. International Fund International | World Growth vs. Emerging Markets Fund | World Growth vs. Science Technology Fund | World Growth vs. Aggressive Growth Fund |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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