Correlation Between BetaShares Managed and SPDR SP

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

By analyzing existing cross correlation between BetaShares Managed Risk and SPDR SP 500, you can compare the effects of market volatilities on BetaShares Managed and SPDR SP 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 BetaShares Managed with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of BetaShares Managed and SPDR SP.

Diversification Opportunities for BetaShares Managed and SPDR SP

0.99

Correlation Coefficient

BetaShares Managed  SPDR SP

No risk reduction

The 3 months correlation between BetaShares and SPDR is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding BetaShares Managed Risk and SPDR SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP 500 and BetaShares Managed 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 BetaShares Managed Risk are associated (or correlated) with SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP 500 has no effect on the direction of BetaShares Managed i.e., BetaShares Managed and SPDR SP go up and down completely randomly.

Pair Corralation between BetaShares Managed and SPDR SP

Assuming the 90 days trading horizon BetaShares Managed is expected to generate 1.32 times less return on investment than SPDR SP. But when comparing it to its historical volatility, BetaShares Managed Risk is 1.14 times less risky than SPDR SP. It trades about 0.24 of its potential returns per unit of risk. SPDR SP 500 is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  82,996  in SPDR SP 500 on September 13, 2024 and sell it today you would earn a total of  11,717  from holding SPDR SP 500 or generate 14.12% return on investment over 90 days.

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

BetaShares Managed Risk  vs.  SPDR SP 500

BetaShares Managed Risk

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BetaShares Managed Risk are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, BetaShares Managed may actually be approaching a critical reversion point that can send shares even higher in January 2025.

SPDR SP 500

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP 500 are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, SPDR SP unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BetaShares Managed and SPDR SP

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

The idea behind BetaShares Managed Risk and SPDR SP 500 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.