Correlation Between SPDR Kensho and AB Disruptors

Can any of the company-specific risk be diversified away by investing in both SPDR Kensho and AB Disruptors 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 AB Disruptors 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 AB Disruptors ETF, you can compare the effects of market volatilities on SPDR Kensho and AB Disruptors 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 AB Disruptors. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Kensho and AB Disruptors.

Diversification Opportunities for SPDR Kensho and AB Disruptors

0.29

Correlation Coefficient

SPDR Kensho  AB Disruptors

Modest diversification

The 3 months correlation between SPDR and FWD is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Kensho Clean and AB Disruptors ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AB Disruptors ETF 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 AB Disruptors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AB Disruptors ETF has no effect on the direction of SPDR Kensho i.e., SPDR Kensho and AB Disruptors go up and down completely randomly.

Pair Corralation between SPDR Kensho and AB Disruptors

Given the investment horizon of 90 days SPDR Kensho Clean is expected to under-perform the AB Disruptors. In addition to that, SPDR Kensho is 1.44 times more volatile than AB Disruptors ETF. It trades about -0.02 of its total potential returns per unit of risk. AB Disruptors ETF is currently generating about 0.09 per unit of volatility. If you would invest  4,913  in AB Disruptors ETF on October 10, 2024 and sell it today you would earn a total of  3,226  from holding AB Disruptors ETF or generate 65.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	91.53%
Values	Daily Returns

SPDR Kensho Clean  vs.  AB Disruptors ETF

SPDR Kensho Clean

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Kensho Clean are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, SPDR Kensho may actually be approaching a critical reversion point that can send shares even higher in February 2025.

AB Disruptors ETF

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AB Disruptors ETF are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, AB Disruptors is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with SPDR Kensho and AB Disruptors

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

The idea behind SPDR Kensho Clean and AB Disruptors ETF 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.