Correlation Between SPDR SSGA and Large Cap

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

By analyzing existing cross correlation between SPDR SSGA Gender and Large Cap E, you can compare the effects of market volatilities on SPDR SSGA and Large Cap 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 SSGA with a short position of Large Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SSGA and Large Cap.

Diversification Opportunities for SPDR SSGA and Large Cap

0.32

Correlation Coefficient

SPDR SSGA  Large Cap

Weak diversification

The 3 months correlation between SPDR and Large is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SSGA Gender and Large Cap E in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Large Cap E and SPDR SSGA 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 SSGA Gender are associated (or correlated) with Large Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Large Cap E has no effect on the direction of SPDR SSGA i.e., SPDR SSGA and Large Cap go up and down completely randomly.

Pair Corralation between SPDR SSGA and Large Cap

Considering the 90-day investment horizon SPDR SSGA Gender is expected to generate 0.54 times more return on investment than Large Cap. However, SPDR SSGA Gender is 1.87 times less risky than Large Cap. It trades about 0.11 of its potential returns per unit of risk. Large Cap E is currently generating about -0.01 per unit of risk. If you would invest  9,387  in SPDR SSGA Gender on September 24, 2024 and sell it today you would earn a total of  2,285  from holding SPDR SSGA Gender or generate 24.34% return on investment over 90 days.

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

SPDR SSGA Gender  vs.  Large Cap E

SPDR SSGA Gender

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SSGA Gender are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical indicators, SPDR SSGA is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Large Cap E

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Large Cap E has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with SPDR SSGA and Large Cap

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

The idea behind SPDR SSGA Gender and Large Cap E 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.