Correlation Between SPDR Kensho and SPDR SP

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

Diversification Opportunities for SPDR Kensho and SPDR SP

0.95

Correlation Coefficient

SPDR Kensho  SPDR SP

Almost no diversification

The 3 months correlation between SPDR and SPDR is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Kensho New and SPDR SP Kensho in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Kensho and SPDR Kensho 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 Kensho New 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 Kensho has no effect on the direction of SPDR Kensho i.e., SPDR Kensho and SPDR SP go up and down completely randomly.

Pair Corralation between SPDR Kensho and SPDR SP

Given the investment horizon of 90 days SPDR Kensho New is expected to under-perform the SPDR SP. In addition to that, SPDR Kensho is 1.02 times more volatile than SPDR SP Kensho. It trades about -0.08 of its total potential returns per unit of risk. SPDR SP Kensho is currently generating about -0.05 per unit of volatility. If you would invest  6,801  in SPDR SP Kensho on December 24, 2024 and sell it today you would lose (325.40) from holding SPDR SP Kensho or give up 4.78% of portfolio value over 90 days.

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

SPDR Kensho New  vs.  SPDR SP Kensho

SPDR Kensho New

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR Kensho New has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest fragile performance, the Etf's primary indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the ETF retail investors.

SPDR SP Kensho

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR SP Kensho has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, SPDR SP is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with SPDR Kensho and SPDR SP

The main advantage of trading using opposite SPDR Kensho and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR Kensho 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 Kensho New and SPDR SP Kensho 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.

Check out your portfolio center.

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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.