Correlation Between SPDR SP and Xtrackers Russell

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

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

Diversification Opportunities for SPDR SP and Xtrackers Russell

0.97

Correlation Coefficient

SPDR SP  Xtrackers Russell

Almost no diversification

The 3 months correlation between SPDR and Xtrackers is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP MIDCAP and Xtrackers Russell Multifactor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers Russell 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 MIDCAP are associated (or correlated) with Xtrackers Russell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers Russell has no effect on the direction of SPDR SP i.e., SPDR SP and Xtrackers Russell go up and down completely randomly.

Pair Corralation between SPDR SP and Xtrackers Russell

Considering the 90-day investment horizon SPDR SP is expected to generate 1.01 times less return on investment than Xtrackers Russell. In addition to that, SPDR SP is 1.34 times more volatile than Xtrackers Russell Multifactor. It trades about 0.05 of its total potential returns per unit of risk. Xtrackers Russell Multifactor is currently generating about 0.07 per unit of volatility. If you would invest  4,152  in Xtrackers Russell Multifactor on October 10, 2024 and sell it today you would earn a total of  1,232  from holding Xtrackers Russell Multifactor or generate 29.67% return on investment over 90 days.

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

SPDR SP MIDCAP  vs.  Xtrackers Russell Multifactor

SPDR SP MIDCAP

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP MIDCAP are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental indicators, SPDR SP is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Xtrackers Russell

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xtrackers Russell Multifactor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Xtrackers Russell is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with SPDR SP and Xtrackers Russell

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

The idea behind SPDR SP MIDCAP and Xtrackers Russell Multifactor 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.