Correlation Between SPDR Kensho and SPDR SP

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

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

Diversification Opportunities for SPDR Kensho and SPDR SP

0.66

Correlation Coefficient

SPDR Kensho  SPDR SP

Poor diversification

The 3 months correlation between SPDR and SPDR is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Kensho Future and SPDR SP Kensho in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Kensho and SPDR Kensho 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 Kensho Future are associated (or correlated) with SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP Kensho has no effect on the direction of SPDR Kensho i.e., SPDR Kensho and SPDR SP go up and down completely randomly.

Pair Corralation between SPDR Kensho and SPDR SP

Given the investment horizon of 90 days SPDR Kensho Future is expected to generate 0.64 times more return on investment than SPDR SP. However, SPDR Kensho Future is 1.56 times less risky than SPDR SP. It trades about 0.09 of its potential returns per unit of risk. SPDR SP Kensho is currently generating about 0.01 per unit of risk. If you would invest  5,455  in SPDR Kensho Future on September 12, 2024 and sell it today you would earn a total of  1,316  from holding SPDR Kensho Future or generate 24.12% return on investment over 90 days.

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

SPDR Kensho Future  vs.  SPDR SP Kensho

SPDR Kensho Future

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Kensho Future are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady technical and fundamental indicators, SPDR Kensho unveiled solid returns over the last few months and may actually be approaching a breakup point.

SPDR SP Kensho

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP Kensho are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, SPDR SP may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with SPDR Kensho and SPDR SP

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

The idea behind SPDR Kensho Future and SPDR SP Kensho 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..