Correlation Between SPDR SP and VictoryShares THB

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

Diversification Opportunities for SPDR SP and VictoryShares THB

0.86

Correlation Coefficient

SPDR SP  VictoryShares THB

Very poor diversification

The 3 months correlation between SPDR and VictoryShares is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP MIDCAP and VictoryShares THB Mid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VictoryShares THB Mid 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 VictoryShares THB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VictoryShares THB Mid has no effect on the direction of SPDR SP i.e., SPDR SP and VictoryShares THB go up and down completely randomly.

Pair Corralation between SPDR SP and VictoryShares THB

Considering the 90-day investment horizon SPDR SP MIDCAP is expected to under-perform the VictoryShares THB. In addition to that, SPDR SP is 1.18 times more volatile than VictoryShares THB Mid. It trades about -0.09 of its total potential returns per unit of risk. VictoryShares THB Mid is currently generating about -0.04 per unit of volatility. If you would invest  2,794  in VictoryShares THB Mid on December 30, 2024 and sell it today you would lose (71.00) from holding VictoryShares THB Mid or give up 2.54% of portfolio value over 90 days.

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

SPDR SP MIDCAP  vs.  VictoryShares THB Mid

SPDR SP MIDCAP

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR SP MIDCAP has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

VictoryShares THB Mid

Risk-Adjusted Performance

Very Weak

Over the last 90 days VictoryShares THB Mid has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental indicators, VictoryShares THB is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with SPDR SP and VictoryShares THB

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

The idea behind SPDR SP MIDCAP and VictoryShares THB Mid 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.