Correlation Between SmartETFs Smart and SPDR SP

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

By analyzing existing cross correlation between SmartETFs Smart Transportation and SPDR SP Kensho, you can compare the effects of market volatilities on SmartETFs Smart 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 SmartETFs Smart with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of SmartETFs Smart and SPDR SP.

Diversification Opportunities for SmartETFs Smart and SPDR SP

0.8

Correlation Coefficient

SmartETFs Smart  SPDR SP

Very poor diversification

The 3 months correlation between SmartETFs and SPDR is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding SmartETFs Smart Transportation and SPDR SP Kensho in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Kensho and SmartETFs Smart 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 SmartETFs Smart Transportation 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 Kensho has no effect on the direction of SmartETFs Smart i.e., SmartETFs Smart and SPDR SP go up and down completely randomly.

Pair Corralation between SmartETFs Smart and SPDR SP

Given the investment horizon of 90 days SmartETFs Smart Transportation is expected to generate 0.81 times more return on investment than SPDR SP. However, SmartETFs Smart Transportation is 1.23 times less risky than SPDR SP. It trades about -0.03 of its potential returns per unit of risk. SPDR SP Kensho is currently generating about -0.08 per unit of risk. If you would invest  4,248  in SmartETFs Smart Transportation on December 28, 2024 and sell it today you would lose (125.20) from holding SmartETFs Smart Transportation or give up 2.95% of portfolio value over 90 days.

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

SmartETFs Smart Transportation  vs.  SPDR SP Kensho

SmartETFs Smart Tran

Risk-Adjusted Performance

Very Weak

Over the last 90 days SmartETFs Smart Transportation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, SmartETFs Smart is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

SPDR SP Kensho

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR SP Kensho has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Etf's forward indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the ETF venture institutional investors.

Pair Trading with SmartETFs Smart and SPDR SP

The main advantage of trading using opposite SmartETFs Smart and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SmartETFs Smart 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 SmartETFs Smart Transportation and SPDR SP Kensho 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.