Correlation Between SPDR SP and SPDR Kensho

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

By analyzing existing cross correlation between SPDR SP Global and SPDR Kensho Intelligent, you can compare the effects of market volatilities on SPDR SP and SPDR Kensho 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 SP with a short position of SPDR Kensho. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and SPDR Kensho.

Diversification Opportunities for SPDR SP and SPDR Kensho

0.16

Correlation Coefficient

SPDR SP  SPDR Kensho

Average diversification

The 3 months correlation between SPDR and SPDR is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP Global and SPDR Kensho Intelligent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Kensho Intelligent and SPDR SP 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 SP Global are associated (or correlated) with SPDR Kensho. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Kensho Intelligent has no effect on the direction of SPDR SP i.e., SPDR SP and SPDR Kensho go up and down completely randomly.

Pair Corralation between SPDR SP and SPDR Kensho

Considering the 90-day investment horizon SPDR SP Global is expected to generate 0.85 times more return on investment than SPDR Kensho. However, SPDR SP Global is 1.17 times less risky than SPDR Kensho. It trades about -0.02 of its potential returns per unit of risk. SPDR Kensho Intelligent is currently generating about -0.21 per unit of risk. If you would invest  6,128  in SPDR SP Global on December 4, 2024 and sell it today you would lose (83.00) from holding SPDR SP Global or give up 1.35% of portfolio value over 90 days.

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

SPDR SP Global  vs.  SPDR Kensho Intelligent

SPDR SP Global

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR SP Global has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward indicators, SPDR SP is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

SPDR Kensho Intelligent

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR Kensho Intelligent has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Etf's forward indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the Etf traders.

Pair Trading with SPDR SP and SPDR Kensho

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

The idea behind SPDR SP Global and SPDR Kensho Intelligent 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.