Correlation Between SWP Growth and SPDR Portfolio

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

By analyzing existing cross correlation between SWP Growth Income and SPDR Portfolio TIPS, you can compare the effects of market volatilities on SWP Growth and SPDR Portfolio 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 SWP Growth with a short position of SPDR Portfolio. Check out your portfolio center. Please also check ongoing floating volatility patterns of SWP Growth and SPDR Portfolio.

Diversification Opportunities for SWP Growth and SPDR Portfolio

0.72

Correlation Coefficient

SWP Growth  SPDR Portfolio

Poor diversification

The 3 months correlation between SWP and SPDR is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding SWP Growth Income and SPDR Portfolio TIPS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Portfolio TIPS and SWP Growth 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 SWP Growth Income are associated (or correlated) with SPDR Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Portfolio TIPS has no effect on the direction of SWP Growth i.e., SWP Growth and SPDR Portfolio go up and down completely randomly.

Pair Corralation between SWP Growth and SPDR Portfolio

Considering the 90-day investment horizon SWP Growth Income is expected to generate 2.33 times more return on investment than SPDR Portfolio. However, SWP Growth is 2.33 times more volatile than SPDR Portfolio TIPS. It trades about 0.35 of its potential returns per unit of risk. SPDR Portfolio TIPS is currently generating about 0.03 per unit of risk. If you would invest  2,370  in SWP Growth Income on April 29, 2025 and sell it today you would earn a total of  344.40  from holding SWP Growth Income or generate 14.53% return on investment over 90 days.

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

SWP Growth Income  vs.  SPDR Portfolio TIPS

SWP Growth Income

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in SWP Growth Income are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, SWP Growth reported solid returns over the last few months and may actually be approaching a breakup point.

SPDR Portfolio TIPS

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Portfolio TIPS are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable forward indicators, SPDR Portfolio is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with SWP Growth and SPDR Portfolio

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

The idea behind SWP Growth Income and SPDR Portfolio TIPS 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.