Correlation Between SPDR SPASX and SPDR SP

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

By analyzing existing cross correlation between SPDR SPASX 200 and SPDR SP 500, you can compare the effects of market volatilities on SPDR SPASX 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 SPDR SPASX with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SPASX and SPDR SP.

Diversification Opportunities for SPDR SPASX and SPDR SP

-0.3

Correlation Coefficient

SPDR SPASX  SPDR SP

Very good diversification

The 3 months correlation between SPDR and SPDR is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SPASX 200 and SPDR SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP 500 and SPDR SPASX 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 SPASX 200 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 500 has no effect on the direction of SPDR SPASX i.e., SPDR SPASX and SPDR SP go up and down completely randomly.

Pair Corralation between SPDR SPASX and SPDR SP

Assuming the 90 days trading horizon SPDR SPASX 200 is expected to under-perform the SPDR SP. In addition to that, SPDR SPASX is 1.34 times more volatile than SPDR SP 500. It trades about -0.02 of its total potential returns per unit of risk. SPDR SP 500 is currently generating about 0.28 per unit of volatility. If you would invest  82,828  in SPDR SP 500 on September 12, 2024 and sell it today you would earn a total of  11,798  from holding SPDR SP 500 or generate 14.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

SPDR SPASX 200  vs.  SPDR SP 500

SPDR SPASX 200

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR SPASX 200 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, SPDR SPASX is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

SPDR SP 500

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP 500 are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, SPDR SP unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SPDR SPASX and SPDR SP

The main advantage of trading using opposite SPDR SPASX and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SPASX 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 SPDR SPASX 200 and SPDR SP 500 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.