Correlation Between SPDR SP and Alpha Blue

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

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

Diversification Opportunities for SPDR SP and Alpha Blue

0.98

Correlation Coefficient

SPDR SP  Alpha Blue

Almost no diversification

The 3 months correlation between SPDR and Alpha is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP MIDCAP and Alpha Blue Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alpha Blue Capital 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 MIDCAP are associated (or correlated) with Alpha Blue. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alpha Blue Capital has no effect on the direction of SPDR SP i.e., SPDR SP and Alpha Blue go up and down completely randomly.

Pair Corralation between SPDR SP and Alpha Blue

Considering the 90-day investment horizon SPDR SP is expected to generate 1.33 times less return on investment than Alpha Blue. But when comparing it to its historical volatility, SPDR SP MIDCAP is 1.09 times less risky than Alpha Blue. It trades about 0.2 of its potential returns per unit of risk. Alpha Blue Capital is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  2,622  in Alpha Blue Capital on September 1, 2024 and sell it today you would earn a total of  440.00  from holding Alpha Blue Capital or generate 16.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

SPDR SP MIDCAP  vs.  Alpha Blue Capital

SPDR SP MIDCAP

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP MIDCAP are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, SPDR SP may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Alpha Blue Capital

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alpha Blue Capital are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting fundamental indicators, Alpha Blue unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SPDR SP and Alpha Blue

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

The idea behind SPDR SP MIDCAP and Alpha Blue Capital 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.