Correlation Between SPDR SP and Multi Units

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

Diversification Opportunities for SPDR SP and Multi Units

-0.67

Correlation Coefficient

SPDR SP  Multi Units

Excellent diversification

The 3 months correlation between SPDR and Multi is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP 500 and Multi Units Luxembourg in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multi Units Luxembourg 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 Multi Units. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multi Units Luxembourg has no effect on the direction of SPDR SP i.e., SPDR SP and Multi Units go up and down completely randomly.

Pair Corralation between SPDR SP and Multi Units

Assuming the 90 days trading horizon SPDR SP 500 is expected to generate 0.58 times more return on investment than Multi Units. However, SPDR SP 500 is 1.72 times less risky than Multi Units. It trades about 0.2 of its potential returns per unit of risk. Multi Units Luxembourg is currently generating about -0.1 per unit of risk. If you would invest  51,542  in SPDR SP 500 on October 3, 2024 and sell it today you would earn a total of  5,378  from holding SPDR SP 500 or generate 10.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

SPDR SP 500  vs.  Multi Units Luxembourg

SPDR SP 500

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP 500 are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, SPDR SP may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Multi Units Luxembourg

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Multi Units Luxembourg has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Etf's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Pair Trading with SPDR SP and Multi Units

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

The idea behind SPDR SP 500 and Multi Units Luxembourg 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.