Correlation Between SPDR Nuveen and SPDR SP

Can any of the company-specific risk be diversified away by investing in both SPDR Nuveen 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 Nuveen 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 Nuveen Municipal and SPDR SP 500, you can compare the effects of market volatilities on SPDR Nuveen 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 Nuveen with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Nuveen and SPDR SP.

Diversification Opportunities for SPDR Nuveen and SPDR SP

-0.21

Correlation Coefficient

SPDR Nuveen  SPDR SP

Very good diversification

The 3 months correlation between SPDR and SPDR is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Nuveen Municipal and SPDR SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP 500 and SPDR Nuveen 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 Nuveen Municipal 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 500 has no effect on the direction of SPDR Nuveen i.e., SPDR Nuveen and SPDR SP go up and down completely randomly.

Pair Corralation between SPDR Nuveen and SPDR SP

Given the investment horizon of 90 days SPDR Nuveen Municipal is expected to generate 0.21 times more return on investment than SPDR SP. However, SPDR Nuveen Municipal is 4.85 times less risky than SPDR SP. It trades about 0.04 of its potential returns per unit of risk. SPDR SP 500 is currently generating about -0.08 per unit of risk. If you would invest  2,728  in SPDR Nuveen Municipal on December 23, 2024 and sell it today you would earn a total of  13.00  from holding SPDR Nuveen Municipal or generate 0.48% return on investment over 90 days.

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

SPDR Nuveen Municipal  vs.  SPDR SP 500

SPDR Nuveen Municipal

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Nuveen Municipal are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, SPDR Nuveen is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

SPDR SP 500

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, SPDR SP is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with SPDR Nuveen and SPDR SP

The main advantage of trading using opposite SPDR Nuveen and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR Nuveen 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 Nuveen Municipal and SPDR SP 500 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.