Correlation Between SPDR Kensho and SPDR STOXX

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

By analyzing existing cross correlation between SPDR Kensho Intelligent and SPDR STOXX Europe, you can compare the effects of market volatilities on SPDR Kensho and SPDR STOXX 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 Kensho with a short position of SPDR STOXX. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Kensho and SPDR STOXX.

Diversification Opportunities for SPDR Kensho and SPDR STOXX

0.27

Correlation Coefficient

SPDR Kensho  SPDR STOXX

Modest diversification

The 3 months correlation between SPDR and SPDR is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Kensho Intelligent and SPDR STOXX Europe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR STOXX Europe and SPDR Kensho 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 Kensho Intelligent are associated (or correlated) with SPDR STOXX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR STOXX Europe has no effect on the direction of SPDR Kensho i.e., SPDR Kensho and SPDR STOXX go up and down completely randomly.

Pair Corralation between SPDR Kensho and SPDR STOXX

Given the investment horizon of 90 days SPDR Kensho is expected to generate 47.04 times less return on investment than SPDR STOXX. But when comparing it to its historical volatility, SPDR Kensho Intelligent is 84.53 times less risky than SPDR STOXX. It trades about 0.23 of its potential returns per unit of risk. SPDR STOXX Europe is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  4,975  in SPDR STOXX Europe on July 23, 2025 and sell it today you would earn a total of  75,025  from holding SPDR STOXX Europe or generate 1508.04% return on investment over 90 days.

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

SPDR Kensho Intelligent  vs.  SPDR STOXX Europe

SPDR Kensho Intelligent

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Kensho Intelligent are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite fairly abnormal forward indicators, SPDR Kensho demonstrated solid returns over the last few months and may actually be approaching a breakup point.

SPDR STOXX Europe

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR STOXX Europe are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady technical and fundamental indicators, SPDR STOXX unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SPDR Kensho and SPDR STOXX

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

The idea behind SPDR Kensho Intelligent and SPDR STOXX Europe 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.