Correlation Between SPDR SP and Exchange Traded

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

By analyzing existing cross correlation between SPDR SP Emerging and Exchange Traded Concepts, you can compare the effects of market volatilities on SPDR SP and Exchange Traded 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 Exchange Traded. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and Exchange Traded.

Diversification Opportunities for SPDR SP and Exchange Traded

0.54

Correlation Coefficient

SPDR SP  Exchange Traded

Very weak diversification

The 3 months correlation between SPDR and Exchange is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP Emerging and Exchange Traded Concepts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exchange Traded Concepts 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 Emerging are associated (or correlated) with Exchange Traded. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exchange Traded Concepts has no effect on the direction of SPDR SP i.e., SPDR SP and Exchange Traded go up and down completely randomly.

Pair Corralation between SPDR SP and Exchange Traded

If you would invest  11,770  in SPDR SP Emerging on September 25, 2024 and sell it today you would lose (2.40) from holding SPDR SP Emerging or give up 0.02% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	1.56%
Values	Daily Returns

SPDR SP Emerging  vs.  Exchange Traded Concepts

SPDR SP Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR SP Emerging has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, SPDR SP is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Exchange Traded Concepts

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Exchange Traded Concepts has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Exchange Traded is not utilizing all of its potentials. The new stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with SPDR SP and Exchange Traded

The main advantage of trading using opposite SPDR SP and Exchange Traded positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP position performs unexpectedly, Exchange Traded 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 Exchange Traded will offset losses from the drop in Exchange Traded's long position.

The idea behind SPDR SP Emerging and Exchange Traded Concepts 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.