Correlation Between SPDR SP and Horizon Kinetics

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

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

Diversification Opportunities for SPDR SP and Horizon Kinetics

0.71

Correlation Coefficient

SPDR SP  Horizon Kinetics

Poor diversification

The 3 months correlation between SPDR and Horizon is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP Biotech and Horizon Kinetics Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Horizon Kinetics Medical 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 Biotech are associated (or correlated) with Horizon Kinetics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Horizon Kinetics Medical has no effect on the direction of SPDR SP i.e., SPDR SP and Horizon Kinetics go up and down completely randomly.

Pair Corralation between SPDR SP and Horizon Kinetics

Considering the 90-day investment horizon SPDR SP Biotech is expected to under-perform the Horizon Kinetics. In addition to that, SPDR SP is 1.67 times more volatile than Horizon Kinetics Medical. It trades about -0.17 of its total potential returns per unit of risk. Horizon Kinetics Medical is currently generating about -0.23 per unit of volatility. If you would invest  2,901  in Horizon Kinetics Medical on October 9, 2024 and sell it today you would lose (264.00) from holding Horizon Kinetics Medical or give up 9.1% of portfolio value over 90 days.

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

SPDR SP Biotech  vs.  Horizon Kinetics Medical

SPDR SP Biotech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR SP Biotech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental drivers, SPDR SP is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Horizon Kinetics Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Horizon Kinetics Medical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Etf's fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the ETF investors.

Pair Trading with SPDR SP and Horizon Kinetics

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

The idea behind SPDR SP Biotech and Horizon Kinetics Medical 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.