Correlation Between SPDR Portfolio and Future Fund

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

Diversification Opportunities for SPDR Portfolio and Future Fund

0.84

Correlation Coefficient

SPDR Portfolio  Future Fund

Very poor diversification

The 3 months correlation between SPDR and Future is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Portfolio SP and The Future Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Future Fund 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 Future Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Future Fund has no effect on the direction of SPDR Portfolio i.e., SPDR Portfolio and Future Fund go up and down completely randomly.

Pair Corralation between SPDR Portfolio and Future Fund

Given the investment horizon of 90 days SPDR Portfolio SP is expected to under-perform the Future Fund. In addition to that, SPDR Portfolio is 1.29 times more volatile than The Future Fund. It trades about -0.09 of its total potential returns per unit of risk. The Future Fund is currently generating about -0.01 per unit of volatility. If you would invest  2,544  in The Future Fund on December 19, 2024 and sell it today you would lose (24.00) from holding The Future Fund or give up 0.94% of portfolio value over 90 days.

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

SPDR Portfolio SP  vs.  The Future Fund

SPDR Portfolio SP

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR Portfolio SP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Etf's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the Exchange Traded Fund stockholders.

Future Fund

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Future Fund has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Future Fund is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with SPDR Portfolio and Future Fund

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

The idea behind SPDR Portfolio SP and The Future Fund 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.