Correlation Between Financial Select and SPDR Bloomberg
Can any of the company-specific risk be diversified away by investing in both Financial Select and SPDR Bloomberg 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 Financial Select and SPDR Bloomberg into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Financial Select Sector and SPDR Bloomberg Convertible, you can compare the effects of market volatilities on Financial Select and SPDR Bloomberg 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 Financial Select with a short position of SPDR Bloomberg. Check out your portfolio center. Please also check ongoing floating volatility patterns of Financial Select and SPDR Bloomberg.
Diversification Opportunities for Financial Select and SPDR Bloomberg
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Financial and SPDR is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Financial Select Sector and SPDR Bloomberg Convertible in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Bloomberg Conve and Financial Select 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 Financial Select Sector are associated (or correlated) with SPDR Bloomberg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Bloomberg Conve has no effect on the direction of Financial Select i.e., Financial Select and SPDR Bloomberg go up and down completely randomly.
Pair Corralation between Financial Select and SPDR Bloomberg
Considering the 90-day investment horizon Financial Select Sector is expected to generate 1.79 times more return on investment than SPDR Bloomberg. However, Financial Select is 1.79 times more volatile than SPDR Bloomberg Convertible. It trades about 0.09 of its potential returns per unit of risk. SPDR Bloomberg Convertible is currently generating about 0.09 per unit of risk. If you would invest 3,379 in Financial Select Sector on August 26, 2024 and sell it today you would earn a total of 1,694 from holding Financial Select Sector or generate 50.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Financial Select Sector vs. SPDR Bloomberg Convertible
Performance |
| Timeline |
| Financial Select Sector |
| SPDR Bloomberg Conve |
Financial Select and SPDR Bloomberg Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Financial Select and SPDR Bloomberg
The main advantage of trading using opposite Financial Select and SPDR Bloomberg positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Financial Select position performs unexpectedly, SPDR Bloomberg 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 Bloomberg will offset losses from the drop in SPDR Bloomberg's long position.| Financial Select vs. Energy Select Sector | Financial Select vs. Technology Select Sector | Financial Select vs. Health Care Select | Financial Select vs. Industrial Select Sector |
| SPDR Bloomberg vs. iShares Convertible Bond | SPDR Bloomberg vs. Invesco Senior Loan | SPDR Bloomberg vs. SPDR Bloomberg Short | SPDR Bloomberg vs. Invesco Emerging Markets |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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