Correlation Between SPDR FactSet and SPDR Kensho

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

By analyzing existing cross correlation between SPDR FactSet Innovative and SPDR Kensho New, you can compare the effects of market volatilities on SPDR FactSet and SPDR Kensho 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 FactSet with a short position of SPDR Kensho. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR FactSet and SPDR Kensho.

Diversification Opportunities for SPDR FactSet and SPDR Kensho

0.98

Correlation Coefficient

SPDR FactSet  SPDR Kensho

Almost no diversification

The 3 months correlation between SPDR and SPDR is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding SPDR FactSet Innovative and SPDR Kensho New in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Kensho New and SPDR FactSet 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 FactSet Innovative are associated (or correlated) with SPDR Kensho. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Kensho New has no effect on the direction of SPDR FactSet i.e., SPDR FactSet and SPDR Kensho go up and down completely randomly.

Pair Corralation between SPDR FactSet and SPDR Kensho

Given the investment horizon of 90 days SPDR FactSet Innovative is expected to generate 1.27 times more return on investment than SPDR Kensho. However, SPDR FactSet is 1.27 times more volatile than SPDR Kensho New. It trades about 0.09 of its potential returns per unit of risk. SPDR Kensho New is currently generating about 0.06 per unit of risk. If you would invest  9,639  in SPDR FactSet Innovative on September 16, 2024 and sell it today you would earn a total of  8,548  from holding SPDR FactSet Innovative or generate 88.68% return on investment over 90 days.

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

SPDR FactSet Innovative  vs.  SPDR Kensho New

SPDR FactSet Innovative

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR FactSet Innovative are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, SPDR FactSet disclosed solid returns over the last few months and may actually be approaching a breakup point.

SPDR Kensho New

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Kensho New are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain primary indicators, SPDR Kensho may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with SPDR FactSet and SPDR Kensho

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

The idea behind SPDR FactSet Innovative and SPDR Kensho New 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.