Correlation Between SPDR SP and Hong Kong

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

By analyzing existing cross correlation between SPDR SP Materials and Hong Kong Land, you can compare the effects of market volatilities on SPDR SP and Hong Kong 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 Hong Kong. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and Hong Kong.

Diversification Opportunities for SPDR SP and Hong Kong

-0.12

Correlation Coefficient

SPDR SP  Hong Kong

Good diversification

The 3 months correlation between SPDR and Hong is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP Materials and Hong Kong Land in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hong Kong Land 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 Materials are associated (or correlated) with Hong Kong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hong Kong Land has no effect on the direction of SPDR SP i.e., SPDR SP and Hong Kong go up and down completely randomly.

Pair Corralation between SPDR SP and Hong Kong

Assuming the 90 days trading horizon SPDR SP Materials is expected to generate 3.24 times more return on investment than Hong Kong. However, SPDR SP is 3.24 times more volatile than Hong Kong Land. It trades about 0.04 of its potential returns per unit of risk. Hong Kong Land is currently generating about 0.13 per unit of risk. If you would invest  4,113  in SPDR SP Materials on December 29, 2024 and sell it today you would earn a total of  98.00  from holding SPDR SP Materials or generate 2.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

SPDR SP Materials  vs.  Hong Kong Land

SPDR SP Materials

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP Materials are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, SPDR SP is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Hong Kong Land

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hong Kong Land are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Hong Kong is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with SPDR SP and Hong Kong

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

The idea behind SPDR SP Materials and Hong Kong Land 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.