Correlation Between SPDR SP and 21Shares Crypto

Can any of the company-specific risk be diversified away by investing in both SPDR SP and 21Shares Crypto 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 21Shares Crypto 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 21Shares Crypto Basket, you can compare the effects of market volatilities on SPDR SP and 21Shares Crypto 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 21Shares Crypto. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and 21Shares Crypto.

Diversification Opportunities for SPDR SP and 21Shares Crypto

0.93

Correlation Coefficient

SPDR SP  21Shares Crypto

Almost no diversification

The 3 months correlation between SPDR and 21Shares is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP 500 and 21Shares Crypto Basket in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 21Shares Crypto Basket 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 21Shares Crypto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 21Shares Crypto Basket has no effect on the direction of SPDR SP i.e., SPDR SP and 21Shares Crypto go up and down completely randomly.

Pair Corralation between SPDR SP and 21Shares Crypto

Assuming the 90 days trading horizon SPDR SP is expected to generate 4.74 times less return on investment than 21Shares Crypto. But when comparing it to its historical volatility, SPDR SP 500 is 4.0 times less risky than 21Shares Crypto. It trades about 0.21 of its potential returns per unit of risk. 21Shares Crypto Basket is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  1,839  in 21Shares Crypto Basket on August 31, 2024 and sell it today you would earn a total of  1,222  from holding 21Shares Crypto Basket or generate 66.45% 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.  21Shares Crypto Basket

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 December 2024.

21Shares Crypto Basket

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in 21Shares Crypto Basket are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, 21Shares Crypto reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SPDR SP and 21Shares Crypto

The main advantage of trading using opposite SPDR SP and 21Shares Crypto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP position performs unexpectedly, 21Shares Crypto 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 21Shares Crypto will offset losses from the drop in 21Shares Crypto's long position.

The idea behind SPDR SP 500 and 21Shares Crypto Basket 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.