Correlation Between SPDR SP and SPDR STOXX

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

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

Diversification Opportunities for SPDR SP and SPDR STOXX

-0.09

Correlation Coefficient

SPDR SP  SPDR STOXX

Good diversification

The 3 months correlation between SPDR and SPDR is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP Kensho and SPDR STOXX Europe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR STOXX Europe 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 Kensho are associated (or correlated) with SPDR STOXX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR STOXX Europe has no effect on the direction of SPDR SP i.e., SPDR SP and SPDR STOXX go up and down completely randomly.

Pair Corralation between SPDR SP and SPDR STOXX

Given the investment horizon of 90 days SPDR SP Kensho is expected to generate 1.95 times more return on investment than SPDR STOXX. However, SPDR SP is 1.95 times more volatile than SPDR STOXX Europe. It trades about 0.1 of its potential returns per unit of risk. SPDR STOXX Europe is currently generating about -0.09 per unit of risk. If you would invest  2,700  in SPDR SP Kensho on September 14, 2024 and sell it today you would earn a total of  250.00  from holding SPDR SP Kensho or generate 9.26% return on investment over 90 days.

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

SPDR SP Kensho  vs.  SPDR STOXX Europe

SPDR SP Kensho

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP Kensho are ranked lower than 7 (%) 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.

SPDR STOXX Europe

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR STOXX Europe has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, SPDR STOXX is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with SPDR SP and SPDR STOXX

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

The idea behind SPDR SP Kensho and SPDR STOXX Europe 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.