Correlation Between SPDR SP and Dimensional Targeted

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

By analyzing existing cross correlation between SPDR SP 400 and Dimensional Targeted Value, you can compare the effects of market volatilities on SPDR SP and Dimensional Targeted 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 Dimensional Targeted. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and Dimensional Targeted.

Diversification Opportunities for SPDR SP and Dimensional Targeted

0.99

Correlation Coefficient

SPDR SP  Dimensional Targeted

No risk reduction

The 3 months correlation between SPDR and Dimensional is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP 400 and Dimensional Targeted Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimensional Targeted 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 400 are associated (or correlated) with Dimensional Targeted. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimensional Targeted has no effect on the direction of SPDR SP i.e., SPDR SP and Dimensional Targeted go up and down completely randomly.

Pair Corralation between SPDR SP and Dimensional Targeted

Given the investment horizon of 90 days SPDR SP 400 is expected to generate 0.82 times more return on investment than Dimensional Targeted. However, SPDR SP 400 is 1.22 times less risky than Dimensional Targeted. It trades about 0.02 of its potential returns per unit of risk. Dimensional Targeted Value is currently generating about 0.01 per unit of risk. If you would invest  7,899  in SPDR SP 400 on September 28, 2024 and sell it today you would earn a total of  100.00  from holding SPDR SP 400 or generate 1.27% 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 400  vs.  Dimensional Targeted Value

SPDR SP 400

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP 400 are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, SPDR SP is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Dimensional Targeted

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dimensional Targeted Value are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Dimensional Targeted is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with SPDR SP and Dimensional Targeted

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

The idea behind SPDR SP 400 and Dimensional Targeted Value 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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.