Correlation Between SPDR FactSet and SPDR SP

Can any of the company-specific risk be diversified away by investing in both SPDR FactSet 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 SPDR FactSet and SPDR SP 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 SP Software, you can compare the effects of market volatilities on SPDR FactSet 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 SPDR FactSet with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR FactSet and SPDR SP.

Diversification Opportunities for SPDR FactSet and SPDR SP

0.6

Correlation Coefficient

SPDR FactSet  SPDR SP

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 FactSet Innovative and SPDR SP Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Software 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 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 Software has no effect on the direction of SPDR FactSet i.e., SPDR FactSet and SPDR SP go up and down completely randomly.

Pair Corralation between SPDR FactSet and SPDR SP

Given the investment horizon of 90 days SPDR FactSet Innovative is expected to generate 1.04 times more return on investment than SPDR SP. However, SPDR FactSet is 1.04 times more volatile than SPDR SP Software. It trades about -0.13 of its potential returns per unit of risk. SPDR SP Software is currently generating about -0.22 per unit of risk. If you would invest  18,492  in SPDR FactSet Innovative on December 5, 2024 and sell it today you would lose (1,373) from holding SPDR FactSet Innovative or give up 7.42% of portfolio value over 90 days.

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

SPDR FactSet Innovative  vs.  SPDR SP Software

SPDR FactSet Innovative

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR FactSet Innovative has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Etf's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the ETF venture institutional investors.

SPDR SP Software

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR SP Software has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Etf's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the fund sophisticated investors.

Pair Trading with SPDR FactSet and SPDR SP

The main advantage of trading using opposite SPDR FactSet and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR FactSet 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 SPDR FactSet Innovative and SPDR SP Software 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.