Correlation Between SPDR SP and DoubleLine Shiller

Can any of the company-specific risk be diversified away by investing in both SPDR SP and DoubleLine Shiller 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 DoubleLine Shiller 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 DoubleLine Shiller CAPE, you can compare the effects of market volatilities on SPDR SP and DoubleLine Shiller 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 DoubleLine Shiller. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and DoubleLine Shiller.

Diversification Opportunities for SPDR SP and DoubleLine Shiller

0.95

Correlation Coefficient

SPDR SP  DoubleLine Shiller

Almost no diversification

The 3 months correlation between SPDR and DoubleLine is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP 500 and DoubleLine Shiller CAPE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DoubleLine Shiller CAPE 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 DoubleLine Shiller. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DoubleLine Shiller CAPE has no effect on the direction of SPDR SP i.e., SPDR SP and DoubleLine Shiller go up and down completely randomly.

Pair Corralation between SPDR SP and DoubleLine Shiller

Considering the 90-day investment horizon SPDR SP 500 is expected to generate 0.93 times more return on investment than DoubleLine Shiller. However, SPDR SP 500 is 1.08 times less risky than DoubleLine Shiller. It trades about 0.12 of its potential returns per unit of risk. DoubleLine Shiller CAPE is currently generating about 0.09 per unit of risk. If you would invest  37,161  in SPDR SP 500 on September 24, 2024 and sell it today you would earn a total of  21,954  from holding SPDR SP 500 or generate 59.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.8%
Values	Daily Returns

SPDR SP 500  vs.  DoubleLine Shiller CAPE

SPDR SP 500

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP 500 are ranked lower than 5 (%) 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.

DoubleLine Shiller CAPE

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in DoubleLine Shiller CAPE are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, DoubleLine Shiller is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with SPDR SP and DoubleLine Shiller

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

The idea behind SPDR SP 500 and DoubleLine Shiller CAPE 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.