Correlation Between SPDR SP and WisdomTree 9060

Can any of the company-specific risk be diversified away by investing in both SPDR SP and WisdomTree 9060 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 WisdomTree 9060 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 WisdomTree 9060 Balanced, you can compare the effects of market volatilities on SPDR SP and WisdomTree 9060 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 WisdomTree 9060. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and WisdomTree 9060.

Diversification Opportunities for SPDR SP and WisdomTree 9060

0.94

Correlation Coefficient

SPDR SP  WisdomTree 9060

Almost no diversification

The 3 months correlation between SPDR and WisdomTree is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP 500 and WisdomTree 9060 Balanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree 9060 Balanced 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 WisdomTree 9060. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree 9060 Balanced has no effect on the direction of SPDR SP i.e., SPDR SP and WisdomTree 9060 go up and down completely randomly.

Pair Corralation between SPDR SP and WisdomTree 9060

Considering the 90-day investment horizon SPDR SP 500 is expected to generate 0.95 times more return on investment than WisdomTree 9060. However, SPDR SP 500 is 1.05 times less risky than WisdomTree 9060. It trades about 0.12 of its potential returns per unit of risk. WisdomTree 9060 Balanced is currently generating about 0.1 per unit of risk. If you would invest  37,478  in SPDR SP 500 on December 2, 2024 and sell it today you would earn a total of  21,940  from holding SPDR SP 500 or generate 58.54% 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.  WisdomTree 9060 Balanced

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 recent stock price disturbance, may contribute to short-term losses for the investors.

WisdomTree 9060 Balanced

Risk-Adjusted Performance

Very Weak

Over the last 90 days WisdomTree 9060 Balanced has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, WisdomTree 9060 is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with SPDR SP and WisdomTree 9060

The main advantage of trading using opposite SPDR SP and WisdomTree 9060 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP position performs unexpectedly, WisdomTree 9060 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 WisdomTree 9060 will offset losses from the drop in WisdomTree 9060's long position.

The idea behind SPDR SP 500 and WisdomTree 9060 Balanced 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.