Correlation Between Sp 500 and Aggressive Investors

Can any of the company-specific risk be diversified away by investing in both Sp 500 and Aggressive Investors 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 Sp 500 and Aggressive Investors into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sp 500 Index and Aggressive Investors 1, you can compare the effects of market volatilities on Sp 500 and Aggressive Investors 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 Sp 500 with a short position of Aggressive Investors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sp 500 and Aggressive Investors.

Diversification Opportunities for Sp 500 and Aggressive Investors

0.96

Correlation Coefficient

Sp 500  Aggressive Investors

Almost no diversification

The 3 months correlation between USPRX and Aggressive is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Sp 500 Index and Aggressive Investors 1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aggressive Investors and Sp 500 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 Sp 500 Index are associated (or correlated) with Aggressive Investors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aggressive Investors has no effect on the direction of Sp 500 i.e., Sp 500 and Aggressive Investors go up and down completely randomly.

Pair Corralation between Sp 500 and Aggressive Investors

Assuming the 90 days horizon Sp 500 is expected to generate 1.38 times less return on investment than Aggressive Investors. But when comparing it to its historical volatility, Sp 500 Index is 1.33 times less risky than Aggressive Investors. It trades about 0.2 of its potential returns per unit of risk. Aggressive Investors 1 is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  8,905  in Aggressive Investors 1 on September 18, 2024 and sell it today you would earn a total of  1,067  from holding Aggressive Investors 1 or generate 11.98% return on investment over 90 days.

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

Sp 500 Index  vs.  Aggressive Investors 1

Sp 500 Index

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sp 500 Index are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Sp 500 may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Aggressive Investors

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aggressive Investors 1 are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Aggressive Investors may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Sp 500 and Aggressive Investors

The main advantage of trading using opposite Sp 500 and Aggressive Investors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sp 500 position performs unexpectedly, Aggressive Investors 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 Aggressive Investors will offset losses from the drop in Aggressive Investors' long position.

The idea behind Sp 500 Index and Aggressive Investors 1 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.