Correlation Between SPDR SP and SPDR SP
Can any of the company-specific risk be diversified away by investing in both SPDR SP 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 SP 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 SP Retail and SPDR SP Regional, you can compare the effects of market volatilities on SPDR SP 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 SP with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and SPDR SP.
Diversification Opportunities for SPDR SP and SPDR SP
Very poor diversification
The 3 months correlation between SPDR and SPDR is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP Retail and SPDR SP Regional in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Regional 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 Retail 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 Regional has no effect on the direction of SPDR SP i.e., SPDR SP and SPDR SP go up and down completely randomly.
Pair Corralation between SPDR SP and SPDR SP
Considering the 90-day investment horizon SPDR SP is expected to generate 1.51 times less return on investment than SPDR SP. But when comparing it to its historical volatility, SPDR SP Retail is 2.5 times less risky than SPDR SP. It trades about 0.34 of its potential returns per unit of risk. SPDR SP Regional is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 5,956 in SPDR SP Regional on August 28, 2024 and sell it today you would earn a total of 860.00 from holding SPDR SP Regional or generate 14.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR SP Retail vs. SPDR SP Regional
Performance |
| Timeline |
| SPDR SP Retail |
| SPDR SP Regional |
SPDR SP and SPDR SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR SP and SPDR SP
The main advantage of trading using opposite SPDR SP and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP 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 SP vs. SPDR SP Homebuilders | SPDR SP vs. Consumer Discretionary Select | SPDR SP vs. SPDR SP Metals | SPDR SP vs. Industrial Select Sector |
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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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