Correlation Between SPDR Kensho and SPDR STOXX

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

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

Diversification Opportunities for SPDR Kensho and SPDR STOXX

0.34

Correlation Coefficient

SPDR Kensho  SPDR STOXX

Weak diversification

The 3 months correlation between SPDR and SPDR is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Kensho Future and SPDR STOXX Europe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR STOXX Europe and SPDR Kensho 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 Kensho Future are associated (or correlated) with SPDR STOXX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR STOXX Europe has no effect on the direction of SPDR Kensho i.e., SPDR Kensho and SPDR STOXX go up and down completely randomly.

Pair Corralation between SPDR Kensho and SPDR STOXX

Given the investment horizon of 90 days SPDR Kensho Future is expected to under-perform the SPDR STOXX. In addition to that, SPDR Kensho is 1.59 times more volatile than SPDR STOXX Europe. It trades about -0.22 of its total potential returns per unit of risk. SPDR STOXX Europe is currently generating about 0.33 per unit of volatility. If you would invest  4,171  in SPDR STOXX Europe on December 4, 2024 and sell it today you would earn a total of  224.00  from holding SPDR STOXX Europe or generate 5.37% return on investment over 90 days.

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

SPDR Kensho Future  vs.  SPDR STOXX Europe

SPDR Kensho Future

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR Kensho Future has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, SPDR Kensho is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

SPDR STOXX Europe

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR STOXX Europe are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady technical and fundamental indicators, SPDR STOXX may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with SPDR Kensho and SPDR STOXX

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

The idea behind SPDR Kensho Future and SPDR STOXX Europe 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.