Correlation Between SPDR SP and SPDR SSgA

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

Diversification Opportunities for SPDR SP and SPDR SSgA

-0.54

Correlation Coefficient

SPDR SP  SPDR SSgA

Excellent diversification

The 3 months correlation between SPDR and SPDR is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP 500 and SPDR SSgA Ultra in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SSgA Ultra 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 SPDR SSgA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SSgA Ultra has no effect on the direction of SPDR SP i.e., SPDR SP and SPDR SSgA go up and down completely randomly.

Pair Corralation between SPDR SP and SPDR SSgA

Considering the 90-day investment horizon SPDR SP 500 is expected to under-perform the SPDR SSgA. In addition to that, SPDR SP is 10.6 times more volatile than SPDR SSgA Ultra. It trades about -0.06 of its total potential returns per unit of risk. SPDR SSgA Ultra is currently generating about 0.23 per unit of volatility. If you would invest  4,006  in SPDR SSgA Ultra on December 26, 2024 and sell it today you would earn a total of  54.00  from holding SPDR SSgA Ultra or generate 1.35% return on investment over 90 days.

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

SPDR SP 500  vs.  SPDR SSgA Ultra

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.

SPDR SSgA Ultra

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SSgA Ultra are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, SPDR SSgA is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with SPDR SP and SPDR SSgA

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

The idea behind SPDR SP 500 and SPDR SSgA Ultra 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.