Correlation Between SPDR SP and RAYTHEON

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

Diversification Opportunities for SPDR SP and RAYTHEON

-0.25

Correlation Coefficient

SPDR SP  RAYTHEON

Very good diversification

The 3 months correlation between SPDR and RAYTHEON is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP 500 and RAYTHEON TECHNOLOGIES PORATION in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RAYTHEON TECHNOLOGIES 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 RAYTHEON. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RAYTHEON TECHNOLOGIES has no effect on the direction of SPDR SP i.e., SPDR SP and RAYTHEON go up and down completely randomly.

Pair Corralation between SPDR SP and RAYTHEON

Considering the 90-day investment horizon SPDR SP 500 is expected to generate 0.81 times more return on investment than RAYTHEON. However, SPDR SP 500 is 1.24 times less risky than RAYTHEON. It trades about 0.1 of its potential returns per unit of risk. RAYTHEON TECHNOLOGIES PORATION is currently generating about -0.07 per unit of risk. If you would invest  57,888  in SPDR SP 500 on October 26, 2024 and sell it today you would earn a total of  2,909  from holding SPDR SP 500 or generate 5.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	86.67%
Values	Daily Returns

SPDR SP 500  vs.  RAYTHEON TECHNOLOGIES PORATION

SPDR SP 500

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP 500 are ranked lower than 7 (%) 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 current stock price disturbance, may contribute to short-term losses for the investors.

RAYTHEON TECHNOLOGIES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RAYTHEON TECHNOLOGIES PORATION has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, RAYTHEON is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with SPDR SP and RAYTHEON

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

The idea behind SPDR SP 500 and RAYTHEON TECHNOLOGIES PORATION 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.