Correlation Between SPDR Kensho and VictoryShares

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

Diversification Opportunities for SPDR Kensho and VictoryShares

0.85

Correlation Coefficient

SPDR Kensho  VictoryShares

Very poor diversification

The 3 months correlation between SPDR and VictoryShares is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Kensho New and VictoryShares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VictoryShares 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 VictoryShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VictoryShares has no effect on the direction of SPDR Kensho i.e., SPDR Kensho and VictoryShares go up and down completely randomly.

Pair Corralation between SPDR Kensho and VictoryShares

Given the investment horizon of 90 days SPDR Kensho New is expected to generate 1.48 times more return on investment than VictoryShares. However, SPDR Kensho is 1.48 times more volatile than VictoryShares. It trades about 0.19 of its potential returns per unit of risk. VictoryShares is currently generating about 0.22 per unit of risk. If you would invest  4,741  in SPDR Kensho New on September 13, 2024 and sell it today you would earn a total of  679.00  from holding SPDR Kensho New or generate 14.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	50.79%
Values	Daily Returns

SPDR Kensho New  vs.  VictoryShares

SPDR Kensho New

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Kensho New are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain primary indicators, SPDR Kensho reported solid returns over the last few months and may actually be approaching a breakup point.

VictoryShares

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days VictoryShares has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very sluggish basic indicators, VictoryShares may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with SPDR Kensho and VictoryShares

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

The idea behind SPDR Kensho New and VictoryShares 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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.