Correlation Between SPDR SP and Texas Capital

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

Diversification Opportunities for SPDR SP and Texas Capital

0.79

Correlation Coefficient

SPDR SP  Texas Capital

Poor diversification

The 3 months correlation between SPDR and Texas is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP MIDCAP and Texas Capital Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Texas Capital Funds 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 Texas Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Texas Capital Funds has no effect on the direction of SPDR SP i.e., SPDR SP and Texas Capital go up and down completely randomly.

Pair Corralation between SPDR SP and Texas Capital

Considering the 90-day investment horizon SPDR SP is expected to generate 1.5 times less return on investment than Texas Capital. In addition to that, SPDR SP is 1.12 times more volatile than Texas Capital Funds. It trades about 0.14 of its total potential returns per unit of risk. Texas Capital Funds is currently generating about 0.24 per unit of volatility. If you would invest  3,052  in Texas Capital Funds on August 30, 2024 and sell it today you would earn a total of  426.00  from holding Texas Capital Funds or generate 13.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

SPDR SP MIDCAP  vs.  Texas Capital Funds

SPDR SP MIDCAP

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP MIDCAP are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, SPDR SP may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Texas Capital Funds

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Texas Capital Funds are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Texas Capital unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SPDR SP and Texas Capital

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

The idea behind SPDR SP MIDCAP and Texas Capital Funds 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.