Correlation Between SPDR SP and GraniteShares HIPS

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

By analyzing existing cross correlation between SPDR SP 500 and GraniteShares HIPS High, you can compare the effects of market volatilities on SPDR SP and GraniteShares HIPS 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 GraniteShares HIPS. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and GraniteShares HIPS.

Diversification Opportunities for SPDR SP and GraniteShares HIPS

0.74

Correlation Coefficient

SPDR SP  GraniteShares HIPS

Poor diversification

The 3 months correlation between SPDR and GraniteShares is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP 500 and GraniteShares HIPS High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GraniteShares HIPS High 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 500 are associated (or correlated) with GraniteShares HIPS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GraniteShares HIPS High has no effect on the direction of SPDR SP i.e., SPDR SP and GraniteShares HIPS go up and down completely randomly.

Pair Corralation between SPDR SP and GraniteShares HIPS

Considering the 90-day investment horizon SPDR SP 500 is expected to generate 1.42 times more return on investment than GraniteShares HIPS. However, SPDR SP is 1.42 times more volatile than GraniteShares HIPS High. It trades about 0.21 of its potential returns per unit of risk. GraniteShares HIPS High is currently generating about 0.16 per unit of risk. If you would invest  54,038  in SPDR SP 500 on August 13, 2024 and sell it today you would earn a total of  5,781  from holding SPDR SP 500 or generate 10.7% return on investment over 90 days.

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

SPDR SP 500  vs.  GraniteShares HIPS High

SPDR SP 500

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP 500 are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, SPDR SP may actually be approaching a critical reversion point that can send shares even higher in December 2024.

GraniteShares HIPS High

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GraniteShares HIPS High are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, GraniteShares HIPS is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with SPDR SP and GraniteShares HIPS

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

The idea behind SPDR SP 500 and GraniteShares HIPS High 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.