Correlation Between SPDR Dow and SF Sustainable

Can any of the company-specific risk be diversified away by investing in both SPDR Dow and SF Sustainable 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 SF Sustainable 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 SF Sustainable Property, you can compare the effects of market volatilities on SPDR Dow and SF Sustainable 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 SF Sustainable. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Dow and SF Sustainable.

Diversification Opportunities for SPDR Dow and SF Sustainable

-0.68

Correlation Coefficient

SPDR Dow  SF Sustainable

Excellent diversification

The 3 months correlation between SPDR and SFPF is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Dow Jones and SF Sustainable Property in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SF Sustainable Property 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 SF Sustainable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SF Sustainable Property has no effect on the direction of SPDR Dow i.e., SPDR Dow and SF Sustainable go up and down completely randomly.

Pair Corralation between SPDR Dow and SF Sustainable

Assuming the 90 days trading horizon SPDR Dow is expected to generate 3.84 times less return on investment than SF Sustainable. But when comparing it to its historical volatility, SPDR Dow Jones is 1.15 times less risky than SF Sustainable. It trades about 0.01 of its potential returns per unit of risk. SF Sustainable Property is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  11,543  in SF Sustainable Property on October 22, 2024 and sell it today you would earn a total of  1,497  from holding SF Sustainable Property or generate 12.97% return on investment over 90 days.

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

SPDR Dow Jones  vs.  SF Sustainable Property

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 latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

SF Sustainable Property

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SF Sustainable Property are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly stable basic indicators, SF Sustainable is not utilizing all of its potentials. The new stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with SPDR Dow and SF Sustainable

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

The idea behind SPDR Dow Jones and SF Sustainable Property 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.