Correlation Between SPDR SP and Advisors Inner

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

Diversification Opportunities for SPDR SP and Advisors Inner

-0.04

Correlation Coefficient

SPDR SP  Advisors Inner

Good diversification

The 3 months correlation between SPDR and Advisors is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP 500 and The Advisors Inner in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advisors Inner 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 Advisors Inner. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advisors Inner has no effect on the direction of SPDR SP i.e., SPDR SP and Advisors Inner go up and down completely randomly.

Pair Corralation between SPDR SP and Advisors Inner

Considering the 90-day investment horizon SPDR SP is expected to generate 914.29 times less return on investment than Advisors Inner. But when comparing it to its historical volatility, SPDR SP 500 is 367.39 times less risky than Advisors Inner. It trades about 0.12 of its potential returns per unit of risk. The Advisors Inner is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  0.00  in The Advisors Inner on October 10, 2024 and sell it today you would earn a total of  2,525  from holding The Advisors Inner or generate 9.223372036854776E16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	2.54%
Values	Daily Returns

SPDR SP 500  vs.  The Advisors Inner

SPDR SP 500

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP 500 are ranked lower than 4 (%) 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 latest stock price disturbance, may contribute to short-term losses for the investors.

Advisors Inner

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in The Advisors Inner are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Advisors Inner showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SPDR SP and Advisors Inner

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

The idea behind SPDR SP 500 and The Advisors Inner 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.