Correlation Between SPDR SP and Impact Shares

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

Diversification Opportunities for SPDR SP and Impact Shares

0.82

Correlation Coefficient

SPDR SP  Impact Shares

Very poor diversification

The 3 months correlation between SPDR and Impact is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP 500 and Impact Shares YWCA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Impact Shares YWCA 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 Impact Shares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Impact Shares YWCA has no effect on the direction of SPDR SP i.e., SPDR SP and Impact Shares go up and down completely randomly.

Pair Corralation between SPDR SP and Impact Shares

Considering the 90-day investment horizon SPDR SP 500 is expected to generate 1.34 times more return on investment than Impact Shares. However, SPDR SP is 1.34 times more volatile than Impact Shares YWCA. It trades about -0.13 of its potential returns per unit of risk. Impact Shares YWCA is currently generating about -0.27 per unit of risk. If you would invest  60,542  in SPDR SP 500 on October 12, 2024 and sell it today you would lose (1,593) from holding SPDR SP 500 or give up 2.63% of portfolio value over 90 days.

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

SPDR SP 500  vs.  Impact Shares YWCA

SPDR SP 500

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP 500 are ranked lower than 2 (%) 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.

Impact Shares YWCA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Impact Shares YWCA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Impact Shares is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with SPDR SP and Impact Shares

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

The idea behind SPDR SP 500 and Impact Shares YWCA 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.