Correlation Between SPDR Portfolio and Foundations Dynamic

Can any of the company-specific risk be diversified away by investing in both SPDR Portfolio and Foundations Dynamic 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 Portfolio and Foundations Dynamic into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SPDR Portfolio SP and Foundations Dynamic Growth, you can compare the effects of market volatilities on SPDR Portfolio and Foundations Dynamic 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 Portfolio with a short position of Foundations Dynamic. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Portfolio and Foundations Dynamic.

Diversification Opportunities for SPDR Portfolio and Foundations Dynamic

0.99

Correlation Coefficient

SPDR Portfolio  Foundations Dynamic

No risk reduction

The 3 months correlation between SPDR and Foundations is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Portfolio SP and Foundations Dynamic Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Foundations Dynamic and SPDR Portfolio 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 Portfolio SP are associated (or correlated) with Foundations Dynamic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Foundations Dynamic has no effect on the direction of SPDR Portfolio i.e., SPDR Portfolio and Foundations Dynamic go up and down completely randomly.

Pair Corralation between SPDR Portfolio and Foundations Dynamic

Given the investment horizon of 90 days SPDR Portfolio is expected to generate 1.12 times less return on investment than Foundations Dynamic. In addition to that, SPDR Portfolio is 1.01 times more volatile than Foundations Dynamic Growth. It trades about 0.11 of its total potential returns per unit of risk. Foundations Dynamic Growth is currently generating about 0.13 per unit of volatility. If you would invest  1,269  in Foundations Dynamic Growth on August 30, 2024 and sell it today you would earn a total of  106.00  from holding Foundations Dynamic Growth or generate 8.35% return on investment over 90 days.

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

SPDR Portfolio SP  vs.  Foundations Dynamic Growth

SPDR Portfolio SP

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Portfolio SP are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, SPDR Portfolio may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Foundations Dynamic

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Foundations Dynamic Growth are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile technical and fundamental indicators, Foundations Dynamic may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with SPDR Portfolio and Foundations Dynamic

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

The idea behind SPDR Portfolio SP and Foundations Dynamic Growth 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.

Check out your portfolio center.

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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.