Correlation Between Avantis Equity and SPDR Dow

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

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

Diversification Opportunities for Avantis Equity and SPDR Dow

0.22

Correlation Coefficient

Avantis Equity  SPDR Dow

Modest diversification

The 3 months correlation between Avantis and SPDR is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Avantis Equity ETF and SPDR Dow Jones in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Dow Jones and Avantis Equity 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 Avantis Equity ETF are associated (or correlated) with SPDR Dow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Dow Jones has no effect on the direction of Avantis Equity i.e., Avantis Equity and SPDR Dow go up and down completely randomly.

Pair Corralation between Avantis Equity and SPDR Dow

Given the investment horizon of 90 days Avantis Equity ETF is expected to generate 0.97 times more return on investment than SPDR Dow. However, Avantis Equity ETF is 1.03 times less risky than SPDR Dow. It trades about 0.07 of its potential returns per unit of risk. SPDR Dow Jones is currently generating about -0.11 per unit of risk. If you would invest  9,639  in Avantis Equity ETF on October 20, 2024 and sell it today you would earn a total of  346.00  from holding Avantis Equity ETF or generate 3.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Avantis Equity ETF  vs.  SPDR Dow Jones

Avantis Equity ETF

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Avantis Equity ETF are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Avantis Equity is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

SPDR Dow Jones

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR Dow Jones has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, SPDR Dow is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Avantis Equity and SPDR Dow

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

The idea behind Avantis Equity ETF and SPDR Dow Jones 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.