Correlation Between SPDR Portfolio and Capital Group

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

By analyzing existing cross correlation between SPDR Portfolio Emerging and Capital Group New, you can compare the effects of market volatilities on SPDR Portfolio and Capital Group 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 Portfolio with a short position of Capital Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Portfolio and Capital Group.

Diversification Opportunities for SPDR Portfolio and Capital Group

0.89

Correlation Coefficient

SPDR Portfolio  Capital Group

Very poor diversification

The 3 months correlation between SPDR and Capital is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Portfolio Emerging and Capital Group New in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Group New and SPDR Portfolio 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 Portfolio Emerging are associated (or correlated) with Capital Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Group New has no effect on the direction of SPDR Portfolio i.e., SPDR Portfolio and Capital Group go up and down completely randomly.

Pair Corralation between SPDR Portfolio and Capital Group

Given the investment horizon of 90 days SPDR Portfolio Emerging is expected to generate 1.23 times more return on investment than Capital Group. However, SPDR Portfolio is 1.23 times more volatile than Capital Group New. It trades about 0.03 of its potential returns per unit of risk. Capital Group New is currently generating about -0.02 per unit of risk. If you would invest  3,859  in SPDR Portfolio Emerging on August 30, 2024 and sell it today you would earn a total of  63.00  from holding SPDR Portfolio Emerging or generate 1.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

SPDR Portfolio Emerging  vs.  Capital Group New

SPDR Portfolio Emerging

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Portfolio Emerging are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, SPDR Portfolio is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Capital Group New

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with SPDR Portfolio and Capital Group

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

The idea behind SPDR Portfolio Emerging and Capital Group New 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.