Correlation Between SPDR Bloomberg and SPDR Kensho

Can any of the company-specific risk be diversified away by investing in both SPDR Bloomberg 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 Bloomberg 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 Bloomberg Barclays and SPDR Kensho Future, you can compare the effects of market volatilities on SPDR Bloomberg 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 Bloomberg with a short position of SPDR Kensho. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Bloomberg and SPDR Kensho.

Diversification Opportunities for SPDR Bloomberg and SPDR Kensho

-0.63

Correlation Coefficient

SPDR Bloomberg  SPDR Kensho

Excellent diversification

The 3 months correlation between SPDR and SPDR is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Bloomberg Barclays and SPDR Kensho Future in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Kensho Future and SPDR Bloomberg 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 Bloomberg Barclays 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 Future has no effect on the direction of SPDR Bloomberg i.e., SPDR Bloomberg and SPDR Kensho go up and down completely randomly.

Pair Corralation between SPDR Bloomberg and SPDR Kensho

Considering the 90-day investment horizon SPDR Bloomberg Barclays is expected to generate 0.17 times more return on investment than SPDR Kensho. However, SPDR Bloomberg Barclays is 5.78 times less risky than SPDR Kensho. It trades about 0.21 of its potential returns per unit of risk. SPDR Kensho Future is currently generating about -0.04 per unit of risk. If you would invest  2,762  in SPDR Bloomberg Barclays on December 23, 2024 and sell it today you would earn a total of  87.00  from holding SPDR Bloomberg Barclays or generate 3.15% return on investment over 90 days.

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

SPDR Bloomberg Barclays  vs.  SPDR Kensho Future

SPDR Bloomberg Barclays

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Bloomberg Barclays are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, SPDR Bloomberg is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

SPDR Kensho Future

Risk-Adjusted Performance

Very Weak

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

Pair Trading with SPDR Bloomberg and SPDR Kensho

The main advantage of trading using opposite SPDR Bloomberg and SPDR Kensho positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR Bloomberg 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 Bloomberg Barclays and SPDR Kensho Future 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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.