Correlation Between Chicken Soup and SPDR SP

Can any of the company-specific risk be diversified away by investing in both Chicken Soup 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 Chicken Soup and SPDR SP into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Chicken Soup For and SPDR SP Homebuilders, you can compare the effects of market volatilities on Chicken Soup 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 Chicken Soup with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chicken Soup and SPDR SP.

Diversification Opportunities for Chicken Soup and SPDR SP

0.05

Correlation Coefficient

Chicken Soup  SPDR SP

Significant diversification

The 3 months correlation between Chicken and SPDR is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Chicken Soup For and SPDR SP Homebuilders in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Homebuilders and Chicken Soup 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 Chicken Soup For 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 Homebuilders has no effect on the direction of Chicken Soup i.e., Chicken Soup and SPDR SP go up and down completely randomly.

Pair Corralation between Chicken Soup and SPDR SP

If you would invest  11,328  in SPDR SP Homebuilders on September 1, 2024 and sell it today you would earn a total of  961.00  from holding SPDR SP Homebuilders or generate 8.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	1.59%
Values	Daily Returns

Chicken Soup For  vs.  SPDR SP Homebuilders

Chicken Soup For

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chicken Soup For has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, Chicken Soup is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

SPDR SP Homebuilders

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP Homebuilders are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical indicators, SPDR SP may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Chicken Soup and SPDR SP

The main advantage of trading using opposite Chicken Soup and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chicken Soup 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.

The idea behind Chicken Soup For and SPDR SP Homebuilders pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.