Correlation Between SPDR Dow and Avantis Real

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

By analyzing existing cross correlation between SPDR Dow Jones and Avantis Real Estate, you can compare the effects of market volatilities on SPDR Dow and Avantis Real 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 Dow with a short position of Avantis Real. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Dow and Avantis Real.

Diversification Opportunities for SPDR Dow and Avantis Real

0.94

Correlation Coefficient

SPDR Dow  Avantis Real

Almost no diversification

The 3 months correlation between SPDR and Avantis is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Dow Jones and Avantis Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avantis Real Estate and SPDR Dow 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 Dow Jones are associated (or correlated) with Avantis Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avantis Real Estate has no effect on the direction of SPDR Dow i.e., SPDR Dow and Avantis Real go up and down completely randomly.

Pair Corralation between SPDR Dow and Avantis Real

Considering the 90-day investment horizon SPDR Dow Jones is expected to generate 0.99 times more return on investment than Avantis Real. However, SPDR Dow Jones is 1.01 times less risky than Avantis Real. It trades about 0.0 of its potential returns per unit of risk. Avantis Real Estate is currently generating about -0.02 per unit of risk. If you would invest  4,515  in SPDR Dow Jones on December 4, 2024 and sell it today you would lose (12.00) from holding SPDR Dow Jones or give up 0.27% of portfolio value over 90 days.

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

SPDR Dow Jones  vs.  Avantis Real Estate

SPDR Dow Jones

Risk-Adjusted Performance

Very Weak

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

Avantis Real Estate

Risk-Adjusted Performance

Very Weak

Over the last 90 days Avantis Real Estate has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Avantis Real is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with SPDR Dow and Avantis Real

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

The idea behind SPDR Dow Jones and Avantis Real Estate 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.