Correlation Between SPDR Kensho and ALPS Clean

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

By analyzing existing cross correlation between SPDR Kensho Clean and ALPS Clean Energy, you can compare the effects of market volatilities on SPDR Kensho and ALPS Clean 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 ALPS Clean. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Kensho and ALPS Clean.

Diversification Opportunities for SPDR Kensho and ALPS Clean

0.96

Correlation Coefficient

SPDR Kensho  ALPS Clean

Almost no diversification

The 3 months correlation between SPDR and ALPS is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Kensho Clean and ALPS Clean Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALPS Clean Energy 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 Clean are associated (or correlated) with ALPS Clean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALPS Clean Energy has no effect on the direction of SPDR Kensho i.e., SPDR Kensho and ALPS Clean go up and down completely randomly.

Pair Corralation between SPDR Kensho and ALPS Clean

Given the investment horizon of 90 days SPDR Kensho Clean is expected to under-perform the ALPS Clean. In addition to that, SPDR Kensho is 1.24 times more volatile than ALPS Clean Energy. It trades about -0.09 of its total potential returns per unit of risk. ALPS Clean Energy is currently generating about -0.09 per unit of volatility. If you would invest  2,693  in ALPS Clean Energy on December 24, 2024 and sell it today you would lose (267.00) from holding ALPS Clean Energy or give up 9.91% of portfolio value over 90 days.

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

SPDR Kensho Clean  vs.  ALPS Clean Energy

SPDR Kensho Clean

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR Kensho Clean has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Etf's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the Exchange Traded Fund stockholders.

ALPS Clean Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days ALPS Clean Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Etf's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

Pair Trading with SPDR Kensho and ALPS Clean

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

The idea behind SPDR Kensho Clean and ALPS Clean Energy 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.