Correlation Between SPDR SP and Aptus Large

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

Diversification Opportunities for SPDR SP and Aptus Large

0.92

Correlation Coefficient

SPDR SP  Aptus Large

Almost no diversification

The 3 months correlation between SPDR and Aptus is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP 500 and Aptus Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aptus Large Cap 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 Aptus Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aptus Large Cap has no effect on the direction of SPDR SP i.e., SPDR SP and Aptus Large go up and down completely randomly.

Pair Corralation between SPDR SP and Aptus Large

Considering the 90-day investment horizon SPDR SP 500 is expected to under-perform the Aptus Large. In addition to that, SPDR SP is 1.0 times more volatile than Aptus Large Cap. It trades about -0.07 of its total potential returns per unit of risk. Aptus Large Cap is currently generating about -0.07 per unit of volatility. If you would invest  3,284  in Aptus Large Cap on December 27, 2024 and sell it today you would lose (134.29) from holding Aptus Large Cap or give up 4.09% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.36%
Values	Daily Returns

SPDR SP 500  vs.  Aptus Large Cap

SPDR SP 500

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, SPDR SP is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Aptus Large Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aptus Large Cap has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental drivers, Aptus Large is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with SPDR SP and Aptus Large

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

The idea behind SPDR SP 500 and Aptus Large Cap 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.