Correlation Between SPDR SSgA and Dow Jones
Can any of the company-specific risk be diversified away by investing in both SPDR SSgA and Dow Jones 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 SSgA and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR SSgA Global and Dow Jones Industrial, you can compare the effects of market volatilities on SPDR SSgA and Dow Jones 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 SSgA with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SSgA and Dow Jones.
Diversification Opportunities for SPDR SSgA and Dow Jones
Poor diversification
The 3 months correlation between SPDR and Dow is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SSgA Global and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial and SPDR SSgA 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 SSgA Global are associated (or correlated) with Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of SPDR SSgA i.e., SPDR SSgA and Dow Jones go up and down completely randomly.
Pair Corralation between SPDR SSgA and Dow Jones
Considering the 90-day investment horizon SPDR SSgA Global is expected to generate 0.64 times more return on investment than Dow Jones. However, SPDR SSgA Global is 1.57 times less risky than Dow Jones. It trades about 0.01 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about -0.07 per unit of risk. If you would invest 4,542 in SPDR SSgA Global on December 7, 2024 and sell it today you would earn a total of 5.69 from holding SPDR SSgA Global or generate 0.13% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 98.36% |
Values | Daily Returns |
SPDR SSgA Global vs. Dow Jones Industrial
Performance |
Timeline |
SPDR SSgA and Dow Jones Volatility Contrast
Predicted Return Density |
Returns |
SPDR SSgA Global
Pair trading matchups for SPDR SSgA
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with SPDR SSgA and Dow Jones
The main advantage of trading using opposite SPDR SSgA and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SSgA position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.SPDR SSgA vs. SPDR SSgA Income | SPDR SSgA vs. SPDR SSgA Multi Asset | SPDR SSgA vs. SPDR Bloomberg International | SPDR SSgA vs. SPDR Bloomberg Emerging |
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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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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