Correlation Between SPDR SP and Neometals

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

Diversification Opportunities for SPDR SP and Neometals

0.38

Correlation Coefficient

SPDR SP  Neometals

Weak diversification

The 3 months correlation between SPDR and Neometals is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP Materials and Neometals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Neometals 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 Neometals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Neometals has no effect on the direction of SPDR SP i.e., SPDR SP and Neometals go up and down completely randomly.

Pair Corralation between SPDR SP and Neometals

Assuming the 90 days trading horizon SPDR SP is expected to generate 43.59 times less return on investment than Neometals. But when comparing it to its historical volatility, SPDR SP Materials is 5.16 times less risky than Neometals. It trades about 0.01 of its potential returns per unit of risk. Neometals is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  400.00  in Neometals on September 12, 2024 and sell it today you would earn a total of  75.00  from holding Neometals or generate 18.75% return on investment over 90 days.

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

SPDR SP Materials  vs.  Neometals

SPDR SP Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR SP Materials has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Neometals

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Neometals are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Neometals exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SPDR SP and Neometals

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

The idea behind SPDR SP Materials and Neometals 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.