Correlation Between SPDR SP and Beta Shares

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

By analyzing existing cross correlation between SPDR SP 500 and Beta Shares SPASX, you can compare the effects of market volatilities on SPDR SP and Beta Shares 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 Beta Shares. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and Beta Shares.

Diversification Opportunities for SPDR SP and Beta Shares

0.85

Correlation Coefficient

SPDR SP  Beta Shares

Very poor diversification

The 3 months correlation between SPDR and Beta is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP 500 and Beta Shares SPASX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beta Shares SPASX 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 500 are associated (or correlated) with Beta Shares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beta Shares SPASX has no effect on the direction of SPDR SP i.e., SPDR SP and Beta Shares go up and down completely randomly.

Pair Corralation between SPDR SP and Beta Shares

Assuming the 90 days trading horizon SPDR SP 500 is expected to generate 0.75 times more return on investment than Beta Shares. However, SPDR SP 500 is 1.33 times less risky than Beta Shares. It trades about 0.16 of its potential returns per unit of risk. Beta Shares SPASX is currently generating about 0.09 per unit of risk. If you would invest  54,773  in SPDR SP 500 on September 23, 2024 and sell it today you would earn a total of  38,733  from holding SPDR SP 500 or generate 70.72% return on investment over 90 days.

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

SPDR SP 500  vs.  Beta Shares SPASX

SPDR SP 500

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP 500 are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, SPDR SP may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Beta Shares SPASX

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Beta Shares SPASX has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Beta Shares is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with SPDR SP and Beta Shares

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

The idea behind SPDR SP 500 and Beta Shares SPASX 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.