Correlation Between SPDR SP and Capital Group

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

By analyzing existing cross correlation between SPDR SP 500 and Capital Group Core, you can compare the effects of market volatilities on SPDR SP and Capital Group 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 Capital Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and Capital Group.

Diversification Opportunities for SPDR SP and Capital Group

0.98

Correlation Coefficient

SPDR SP  Capital Group

Almost no diversification

The 3 months correlation between SPDR and Capital is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP 500 and Capital Group Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Group Core 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 500 are associated (or correlated) with Capital Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Group Core has no effect on the direction of SPDR SP i.e., SPDR SP and Capital Group go up and down completely randomly.

Pair Corralation between SPDR SP and Capital Group

Considering the 90-day investment horizon SPDR SP is expected to generate 1.05 times less return on investment than Capital Group. In addition to that, SPDR SP is 1.03 times more volatile than Capital Group Core. It trades about 0.08 of its total potential returns per unit of risk. Capital Group Core is currently generating about 0.09 per unit of volatility. If you would invest  3,213  in Capital Group Core on September 22, 2024 and sell it today you would earn a total of  314.00  from holding Capital Group Core or generate 9.77% return on investment over 90 days.

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

SPDR SP 500  vs.  Capital Group Core

SPDR SP 500

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP 500 are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, SPDR SP is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Capital Group Core

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Group Core are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Capital Group is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with SPDR SP and Capital Group

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

The idea behind SPDR SP 500 and Capital Group Core 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.