Correlation Between SPDR Portfolio and Principal Small

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

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

Diversification Opportunities for SPDR Portfolio and Principal Small

0.98

Correlation Coefficient

SPDR Portfolio  Principal Small

Almost no diversification

The 3 months correlation between SPDR and Principal is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Portfolio SP and Principal Small Cap Multi Fact in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Principal Small Cap and SPDR Portfolio 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 Portfolio SP are associated (or correlated) with Principal Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Principal Small Cap has no effect on the direction of SPDR Portfolio i.e., SPDR Portfolio and Principal Small go up and down completely randomly.

Pair Corralation between SPDR Portfolio and Principal Small

Given the investment horizon of 90 days SPDR Portfolio SP is expected to generate 1.03 times more return on investment than Principal Small. However, SPDR Portfolio is 1.03 times more volatile than Principal Small Cap Multi Factor. It trades about 0.24 of its potential returns per unit of risk. Principal Small Cap Multi Factor is currently generating about 0.24 per unit of risk. If you would invest  3,665  in SPDR Portfolio SP on April 20, 2025 and sell it today you would earn a total of  694.00  from holding SPDR Portfolio SP or generate 18.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.41%
Values	Daily Returns

SPDR Portfolio SP  vs.  Principal Small Cap Multi Fact

SPDR Portfolio SP

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Portfolio SP are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, SPDR Portfolio displayed solid returns over the last few months and may actually be approaching a breakup point.

Principal Small Cap

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Principal Small Cap Multi Factor are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Principal Small exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SPDR Portfolio and Principal Small

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

The idea behind SPDR Portfolio SP and Principal Small Cap Multi Factor 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.