Correlation Between SPDR SP and SPDR Morningstar

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

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

Diversification Opportunities for SPDR SP and SPDR Morningstar

0.6

Correlation Coefficient

SPDR SP  SPDR Morningstar

Poor diversification

The 3 months correlation between SPDR and SPDR is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP Consumer and SPDR Morningstar Multi Asset in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Morningstar Multi 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 Consumer are associated (or correlated) with SPDR Morningstar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Morningstar Multi has no effect on the direction of SPDR SP i.e., SPDR SP and SPDR Morningstar go up and down completely randomly.

Pair Corralation between SPDR SP and SPDR Morningstar

Assuming the 90 days trading horizon SPDR SP is expected to generate 1.24 times less return on investment than SPDR Morningstar. In addition to that, SPDR SP is 1.07 times more volatile than SPDR Morningstar Multi Asset. It trades about 0.04 of its total potential returns per unit of risk. SPDR Morningstar Multi Asset is currently generating about 0.05 per unit of volatility. If you would invest  2,678  in SPDR Morningstar Multi Asset on September 5, 2024 and sell it today you would earn a total of  51.00  from holding SPDR Morningstar Multi Asset or generate 1.9% return on investment over 90 days.

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

SPDR SP Consumer  vs.  SPDR Morningstar Multi Asset

SPDR SP Consumer

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP Consumer 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.

SPDR Morningstar Multi

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Morningstar Multi Asset are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, SPDR Morningstar is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with SPDR SP and SPDR Morningstar

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

The idea behind SPDR SP Consumer and SPDR Morningstar Multi Asset 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.