Correlation Between SPDR SP and ALPS International

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

Diversification Opportunities for SPDR SP and ALPS International

-0.77

Correlation Coefficient

SPDR SP  ALPS International

Pay attention - limited upside

The 3 months correlation between SPDR and ALPS is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP 500 and ALPS International Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALPS International Sector 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 ALPS International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALPS International Sector has no effect on the direction of SPDR SP i.e., SPDR SP and ALPS International go up and down completely randomly.

Pair Corralation between SPDR SP and ALPS International

Considering the 90-day investment horizon SPDR SP 500 is expected to generate 0.58 times more return on investment than ALPS International. However, SPDR SP 500 is 1.74 times less risky than ALPS International. It trades about 0.4 of its potential returns per unit of risk. ALPS International Sector is currently generating about -0.02 per unit of risk. If you would invest  58,815  in SPDR SP 500 on September 17, 2024 and sell it today you would earn a total of  1,864  from holding SPDR SP 500 or generate 3.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

SPDR SP 500  vs.  ALPS International Sector

SPDR SP 500

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP 500 are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, SPDR SP may actually be approaching a critical reversion point that can send shares even higher in January 2025.

ALPS International Sector

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ALPS International Sector has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, ALPS International is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with SPDR SP and ALPS International

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

The idea behind SPDR SP 500 and ALPS International Sector 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.