Correlation Between SPDR SP and SPDR Kensho

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

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

Diversification Opportunities for SPDR SP and SPDR Kensho

0.05

Correlation Coefficient

SPDR SP  SPDR Kensho

Significant diversification

The 3 months correlation between SPDR and SPDR is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP Kensho and SPDR Kensho Clean in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Kensho Clean 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 Kensho are associated (or correlated) with SPDR Kensho. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Kensho Clean has no effect on the direction of SPDR SP i.e., SPDR SP and SPDR Kensho go up and down completely randomly.

Pair Corralation between SPDR SP and SPDR Kensho

Given the investment horizon of 90 days SPDR SP is expected to generate 1.15 times less return on investment than SPDR Kensho. But when comparing it to its historical volatility, SPDR SP Kensho is 1.41 times less risky than SPDR Kensho. It trades about 0.19 of its potential returns per unit of risk. SPDR Kensho Clean is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  6,078  in SPDR Kensho Clean on September 18, 2024 and sell it today you would earn a total of  212.00  from holding SPDR Kensho Clean or generate 3.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

SPDR SP Kensho  vs.  SPDR Kensho Clean

SPDR SP Kensho

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP Kensho are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady primary indicators, SPDR SP may actually be approaching a critical reversion point that can send shares even higher in January 2025.

SPDR Kensho Clean

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR Kensho Clean has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, SPDR Kensho is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with SPDR SP and SPDR Kensho

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

The idea behind SPDR SP Kensho and SPDR Kensho Clean 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.