Correlation Between SPDR SP and International Business
Can any of the company-specific risk be diversified away by investing in both SPDR SP and International Business 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 International Business into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR SP Dividend and International Business Machines, you can compare the effects of market volatilities on SPDR SP and International Business 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 International Business. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and International Business.
Diversification Opportunities for SPDR SP and International Business
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between SPDR and International is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP Dividend and International Business Machine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Business 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 Dividend are associated (or correlated) with International Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Business has no effect on the direction of SPDR SP i.e., SPDR SP and International Business go up and down completely randomly.
Pair Corralation between SPDR SP and International Business
Considering the 90-day investment horizon SPDR SP is expected to generate 3.11 times less return on investment than International Business. But when comparing it to its historical volatility, SPDR SP Dividend is 2.54 times less risky than International Business. It trades about 0.05 of its potential returns per unit of risk. International Business Machines is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 17,127 in International Business Machines on January 20, 2024 and sell it today you would earn a total of 1,020 from holding International Business Machines or generate 5.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 96.88% |
| Values | Daily Returns |
SPDR SP Dividend vs. International Business Machine
Performance |
| Timeline |
| SPDR SP Dividend |
| International Business |
SPDR SP and International Business Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR SP and International Business
The main advantage of trading using opposite SPDR SP and International Business positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP position performs unexpectedly, International Business 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 International Business will offset losses from the drop in International Business' long position.| SPDR SP vs. iShares Select Dividend | SPDR SP vs. Vanguard Dividend Appreciation | SPDR SP vs. Vanguard High Dividend | SPDR SP vs. ProShares SP 500 |
| International Business vs. Information Services Group | International Business vs. Home Bancorp | International Business vs. CRA International | International Business vs. Aquagold International |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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