Correlation Between SP Funds and SPDR Bloomberg

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

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

Diversification Opportunities for SP Funds and SPDR Bloomberg

0.79

Correlation Coefficient

SP Funds  SPDR Bloomberg

Poor diversification

The 3 months correlation between SPSK and SPDR is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding SP Funds Dow and SPDR Bloomberg International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Bloomberg Inter and SP Funds 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 SP Funds Dow are associated (or correlated) with SPDR Bloomberg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Bloomberg Inter has no effect on the direction of SP Funds i.e., SP Funds and SPDR Bloomberg go up and down completely randomly.

Pair Corralation between SP Funds and SPDR Bloomberg

Given the investment horizon of 90 days SP Funds Dow is expected to generate 0.89 times more return on investment than SPDR Bloomberg. However, SP Funds Dow is 1.13 times less risky than SPDR Bloomberg. It trades about -0.11 of its potential returns per unit of risk. SPDR Bloomberg International is currently generating about -0.15 per unit of risk. If you would invest  1,773  in SP Funds Dow on February 1, 2024 and sell it today you would lose (21.00) from holding SP Funds Dow or give up 1.18% of portfolio value over 90 days.

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

SP Funds Dow  vs.  SPDR Bloomberg International

SP Funds Dow

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SP Funds Dow has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, SP Funds is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

SPDR Bloomberg Inter

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR Bloomberg International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, SPDR Bloomberg is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with SP Funds and SPDR Bloomberg

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

The idea behind SP Funds Dow and SPDR Bloomberg International 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..