Correlation Between Stellar and SPDR MSCI

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

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

Diversification Opportunities for Stellar and SPDR MSCI

0.15

Correlation Coefficient

Stellar  SPDR MSCI

Average diversification

The 3 months correlation between Stellar and SPDR is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Stellar and SPDR MSCI ACWI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR MSCI ACWI and Stellar 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 Stellar are associated (or correlated) with SPDR MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR MSCI ACWI has no effect on the direction of Stellar i.e., Stellar and SPDR MSCI go up and down completely randomly.

Pair Corralation between Stellar and SPDR MSCI

Assuming the 90 days trading horizon Stellar is expected to under-perform the SPDR MSCI. In addition to that, Stellar is 6.88 times more volatile than SPDR MSCI ACWI. It trades about -0.04 of its total potential returns per unit of risk. SPDR MSCI ACWI is currently generating about -0.02 per unit of volatility. If you would invest  3,670  in SPDR MSCI ACWI on December 20, 2024 and sell it today you would lose (57.00) from holding SPDR MSCI ACWI or give up 1.55% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	93.65%
Values	Daily Returns

Stellar  vs.  SPDR MSCI ACWI

Stellar

Risk-Adjusted Performance

Very Weak

Over the last 90 days Stellar 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 Crypto's primary indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for Stellar shareholders.

SPDR MSCI ACWI

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR MSCI ACWI has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, SPDR MSCI is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Stellar and SPDR MSCI

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

The idea behind Stellar and SPDR MSCI ACWI 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.