Correlation Between SPDR Dow and CSIF III

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

By analyzing existing cross correlation between SPDR Dow Jones and CSIF III Equity, you can compare the effects of market volatilities on SPDR Dow and CSIF III 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 Dow with a short position of CSIF III. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Dow and CSIF III.

Diversification Opportunities for SPDR Dow and CSIF III

0.17

Correlation Coefficient

SPDR Dow  CSIF III

Average diversification

The 3 months correlation between SPDR and CSIF is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Dow Jones and CSIF III Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSIF III Equity and SPDR Dow 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 Dow Jones are associated (or correlated) with CSIF III. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSIF III Equity has no effect on the direction of SPDR Dow i.e., SPDR Dow and CSIF III go up and down completely randomly.

Pair Corralation between SPDR Dow and CSIF III

Assuming the 90 days trading horizon SPDR Dow Jones is expected to under-perform the CSIF III. In addition to that, SPDR Dow is 1.1 times more volatile than CSIF III Equity. It trades about -0.02 of its total potential returns per unit of risk. CSIF III Equity is currently generating about 0.12 per unit of volatility. If you would invest  198,861  in CSIF III Equity on October 24, 2024 and sell it today you would earn a total of  16,514  from holding CSIF III Equity or generate 8.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.75%
Values	Daily Returns

SPDR Dow Jones  vs.  CSIF III Equity

SPDR Dow Jones

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR Dow Jones has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, SPDR Dow is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

CSIF III Equity

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CSIF III Equity are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly inconsistent basic indicators, CSIF III may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with SPDR Dow and CSIF III

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

The idea behind SPDR Dow Jones and CSIF III Equity 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .