Correlation Between SPDR SP and Guru Favorite

Can any of the company-specific risk be diversified away by investing in both SPDR SP and Guru Favorite 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 Guru Favorite 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 Guru Favorite Stocks, you can compare the effects of market volatilities on SPDR SP and Guru Favorite 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 Guru Favorite. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and Guru Favorite.

Diversification Opportunities for SPDR SP and Guru Favorite

0.8

Correlation Coefficient

SPDR SP  Guru Favorite

Very poor diversification

The 3 months correlation between SPDR and Guru is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP 500 and Guru Favorite Stocks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guru Favorite Stocks 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 Guru Favorite. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guru Favorite Stocks has no effect on the direction of SPDR SP i.e., SPDR SP and Guru Favorite go up and down completely randomly.

Pair Corralation between SPDR SP and Guru Favorite

Considering the 90-day investment horizon SPDR SP is expected to generate 1.24 times less return on investment than Guru Favorite. But when comparing it to its historical volatility, SPDR SP 500 is 1.08 times less risky than Guru Favorite. It trades about 0.14 of its potential returns per unit of risk. Guru Favorite Stocks is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  2,976  in Guru Favorite Stocks on August 30, 2024 and sell it today you would earn a total of  244.00  from holding Guru Favorite Stocks or generate 8.2% 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.  Guru Favorite Stocks

SPDR SP 500

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP 500 are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, SPDR SP may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Guru Favorite Stocks

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Guru Favorite Stocks are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating technical and fundamental indicators, Guru Favorite may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with SPDR SP and Guru Favorite

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

The idea behind SPDR SP 500 and Guru Favorite Stocks 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.

Check out your portfolio center.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.