Correlation Between SPDR Morningstar and SPDR SP

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

By analyzing existing cross correlation between SPDR Morningstar Multi Asset and SPDR SP 500, you can compare the effects of market volatilities on SPDR Morningstar and SPDR SP 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 Morningstar with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Morningstar and SPDR SP.

Diversification Opportunities for SPDR Morningstar and SPDR SP

0.7

Correlation Coefficient

SPDR Morningstar  SPDR SP

Poor diversification

The 3 months correlation between SPDR and SPDR is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Morningstar Multi Asset and SPDR SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP 500 and SPDR Morningstar 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 Morningstar Multi Asset are associated (or correlated) with SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP 500 has no effect on the direction of SPDR Morningstar i.e., SPDR Morningstar and SPDR SP go up and down completely randomly.

Pair Corralation between SPDR Morningstar and SPDR SP

Assuming the 90 days trading horizon SPDR Morningstar Multi Asset is expected to generate 0.77 times more return on investment than SPDR SP. However, SPDR Morningstar Multi Asset is 1.29 times less risky than SPDR SP. It trades about 0.03 of its potential returns per unit of risk. SPDR SP 500 is currently generating about -0.1 per unit of risk. If you would invest  2,645  in SPDR Morningstar Multi Asset on December 27, 2024 and sell it today you would earn a total of  33.00  from holding SPDR Morningstar Multi Asset or generate 1.25% return on investment over 90 days.

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

SPDR Morningstar Multi Asset  vs.  SPDR SP 500

SPDR Morningstar Multi

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Morningstar Multi Asset are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, SPDR Morningstar is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

SPDR SP 500

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, SPDR SP is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with SPDR Morningstar and SPDR SP

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

The idea behind SPDR Morningstar Multi Asset and SPDR SP 500 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.