Correlation Between EA Series and SPDR Portfolio
Can any of the company-specific risk be diversified away by investing in both EA Series and SPDR Portfolio 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 EA Series and SPDR Portfolio into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EA Series Trust and SPDR Portfolio SP, you can compare the effects of market volatilities on EA Series and SPDR Portfolio 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 EA Series with a short position of SPDR Portfolio. Check out your portfolio center. Please also check ongoing floating volatility patterns of EA Series and SPDR Portfolio.
Diversification Opportunities for EA Series and SPDR Portfolio
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between STXD and SPDR is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding EA Series Trust and SPDR Portfolio SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Portfolio SP and EA Series 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 EA Series Trust are associated (or correlated) with SPDR Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Portfolio SP has no effect on the direction of EA Series i.e., EA Series and SPDR Portfolio go up and down completely randomly.
Pair Corralation between EA Series and SPDR Portfolio
Given the investment horizon of 90 days EA Series Trust is expected to generate 0.79 times more return on investment than SPDR Portfolio. However, EA Series Trust is 1.27 times less risky than SPDR Portfolio. It trades about -0.15 of its potential returns per unit of risk. SPDR Portfolio SP is currently generating about -0.26 per unit of risk. If you would invest 3,365 in EA Series Trust on October 7, 2024 and sell it today you would lose (92.00) from holding EA Series Trust or give up 2.73% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
EA Series Trust vs. SPDR Portfolio SP
Performance |
Timeline |
EA Series Trust |
SPDR Portfolio SP |
EA Series and SPDR Portfolio Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with EA Series and SPDR Portfolio
The main advantage of trading using opposite EA Series and SPDR Portfolio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EA Series position performs unexpectedly, SPDR Portfolio 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 SPDR Portfolio will offset losses from the drop in SPDR Portfolio's long position.EA Series vs. EA Series Trust | EA Series vs. EA Series Trust | EA Series vs. EA Series Trust | EA Series vs. EA Series Trust |
SPDR Portfolio vs. SPDR Russell Small | SPDR Portfolio vs. SPDR SP World | SPDR Portfolio vs. SPDR Portfolio Emerging | SPDR Portfolio vs. SPDR Portfolio SP |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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