Correlation Between Intermediate-term and Sp 500

Can any of the company-specific risk be diversified away by investing in both Intermediate-term and Sp 500 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 Intermediate-term and Sp 500 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Intermediate Term Bond Fund and Sp 500 Index, you can compare the effects of market volatilities on Intermediate-term and Sp 500 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 Intermediate-term with a short position of Sp 500. Check out your portfolio center. Please also check ongoing floating volatility patterns of Intermediate-term and Sp 500.

Diversification Opportunities for Intermediate-term and Sp 500

-0.73

Correlation Coefficient

Intermediate-term  Sp 500

Pay attention - limited upside

The 3 months correlation between Intermediate-term and USSPX is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Intermediate Term Bond Fund and Sp 500 Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sp 500 Index and Intermediate-term 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 Intermediate Term Bond Fund are associated (or correlated) with Sp 500. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sp 500 Index has no effect on the direction of Intermediate-term i.e., Intermediate-term and Sp 500 go up and down completely randomly.

Pair Corralation between Intermediate-term and Sp 500

Assuming the 90 days horizon Intermediate Term Bond Fund is expected to under-perform the Sp 500. But the mutual fund apears to be less risky and, when comparing its historical volatility, Intermediate Term Bond Fund is 2.45 times less risky than Sp 500. The mutual fund trades about -0.03 of its potential returns per unit of risk. The Sp 500 Index is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  7,019  in Sp 500 Index on September 3, 2024 and sell it today you would earn a total of  717.00  from holding Sp 500 Index or generate 10.22% return on investment over 90 days.

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

Intermediate Term Bond Fund  vs.  Sp 500 Index

Intermediate Term Bond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Intermediate Term Bond Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental drivers, Intermediate-term is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Sp 500 Index

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sp 500 Index are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Sp 500 may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Intermediate-term and Sp 500

The main advantage of trading using opposite Intermediate-term and Sp 500 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Intermediate-term position performs unexpectedly, Sp 500 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 Sp 500 will offset losses from the drop in Sp 500's long position.

The idea behind Intermediate Term Bond Fund and Sp 500 Index 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..