Correlation Between SPDR SP and Xtrackers Harvest

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

By analyzing existing cross correlation between SPDR SP Emerging and Xtrackers Harvest CSI, you can compare the effects of market volatilities on SPDR SP and Xtrackers Harvest 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 Xtrackers Harvest. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and Xtrackers Harvest.

Diversification Opportunities for SPDR SP and Xtrackers Harvest

0.74

Correlation Coefficient

SPDR SP  Xtrackers Harvest

Poor diversification

The 3 months correlation between SPDR and Xtrackers is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP Emerging and Xtrackers Harvest CSI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers Harvest CSI 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 Emerging are associated (or correlated) with Xtrackers Harvest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers Harvest CSI has no effect on the direction of SPDR SP i.e., SPDR SP and Xtrackers Harvest go up and down completely randomly.

Pair Corralation between SPDR SP and Xtrackers Harvest

Considering the 90-day investment horizon SPDR SP is expected to generate 1.76 times less return on investment than Xtrackers Harvest. But when comparing it to its historical volatility, SPDR SP Emerging is 2.11 times less risky than Xtrackers Harvest. It trades about 0.1 of its potential returns per unit of risk. Xtrackers Harvest CSI is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  2,621  in Xtrackers Harvest CSI on September 26, 2024 and sell it today you would earn a total of  85.00  from holding Xtrackers Harvest CSI or generate 3.24% return on investment over 90 days.

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

SPDR SP Emerging  vs.  Xtrackers Harvest CSI

SPDR SP Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR SP Emerging has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, SPDR SP is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Xtrackers Harvest CSI

Risk-Adjusted Performance

2 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers Harvest CSI are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively sluggish technical indicators, Xtrackers Harvest may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with SPDR SP and Xtrackers Harvest

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

The idea behind SPDR SP Emerging and Xtrackers Harvest CSI 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.