Correlation Between SPDR SPASX and Australian High

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

By analyzing existing cross correlation between SPDR SPASX 200 and Australian High Interest, you can compare the effects of market volatilities on SPDR SPASX and Australian High 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 SPASX with a short position of Australian High. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SPASX and Australian High.

Diversification Opportunities for SPDR SPASX and Australian High

0.77

Correlation Coefficient

SPDR SPASX  Australian High

Poor diversification

The 3 months correlation between SPDR and Australian is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SPASX 200 and Australian High Interest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian High Interest and SPDR SPASX 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 SPASX 200 are associated (or correlated) with Australian High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian High Interest has no effect on the direction of SPDR SPASX i.e., SPDR SPASX and Australian High go up and down completely randomly.

Pair Corralation between SPDR SPASX and Australian High

Assuming the 90 days trading horizon SPDR SPASX 200 is expected to generate 33.62 times more return on investment than Australian High. However, SPDR SPASX is 33.62 times more volatile than Australian High Interest. It trades about 0.17 of its potential returns per unit of risk. Australian High Interest is currently generating about 0.93 per unit of risk. If you would invest  2,535  in SPDR SPASX 200 on September 4, 2024 and sell it today you would earn a total of  169.00  from holding SPDR SPASX 200 or generate 6.67% return on investment over 90 days.

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

SPDR SPASX 200  vs.  Australian High Interest

SPDR SPASX 200

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SPASX 200 are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, SPDR SPASX may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Australian High Interest

Risk-Adjusted Performance

72 of 100

Market Crasher

Compared to the overall equity markets, risk-adjusted returns on investments in Australian High Interest are ranked lower than 72 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Australian High is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with SPDR SPASX and Australian High

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

The idea behind SPDR SPASX 200 and Australian High Interest 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.