Correlation Between SPDR Portfolio and ClearBridge Dividend

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

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

Diversification Opportunities for SPDR Portfolio and ClearBridge Dividend

0.97

Correlation Coefficient

SPDR Portfolio  ClearBridge Dividend

Almost no diversification

The 3 months correlation between SPDR and ClearBridge is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Portfolio SP and ClearBridge Dividend Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ClearBridge Dividend 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 SP are associated (or correlated) with ClearBridge Dividend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ClearBridge Dividend has no effect on the direction of SPDR Portfolio i.e., SPDR Portfolio and ClearBridge Dividend go up and down completely randomly.

Pair Corralation between SPDR Portfolio and ClearBridge Dividend

Given the investment horizon of 90 days SPDR Portfolio is expected to generate 1.46 times less return on investment than ClearBridge Dividend. But when comparing it to its historical volatility, SPDR Portfolio SP is 1.0 times less risky than ClearBridge Dividend. It trades about 0.15 of its potential returns per unit of risk. ClearBridge Dividend Strategy is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  4,878  in ClearBridge Dividend Strategy on September 4, 2024 and sell it today you would earn a total of  430.00  from holding ClearBridge Dividend Strategy or generate 8.82% return on investment over 90 days.

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

SPDR Portfolio SP  vs.  ClearBridge Dividend Strategy

SPDR Portfolio SP

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Portfolio SP are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, SPDR Portfolio is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

ClearBridge Dividend

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ClearBridge Dividend Strategy are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, ClearBridge Dividend may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with SPDR Portfolio and ClearBridge Dividend

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

The idea behind SPDR Portfolio SP and ClearBridge Dividend Strategy 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.