Correlation Between Stellar and SPDR Russell

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

By analyzing existing cross correlation between Stellar and SPDR Russell 1000, you can compare the effects of market volatilities on Stellar and SPDR Russell 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 Russell. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stellar and SPDR Russell.

Diversification Opportunities for Stellar and SPDR Russell

0.67

Correlation Coefficient

Stellar  SPDR Russell

Poor diversification

The 3 months correlation between Stellar and SPDR is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Stellar and SPDR Russell 1000 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Russell 1000 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 Russell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Russell 1000 has no effect on the direction of Stellar i.e., Stellar and SPDR Russell go up and down completely randomly.

Pair Corralation between Stellar and SPDR Russell

Assuming the 90 days trading horizon Stellar is expected to generate 13.89 times more return on investment than SPDR Russell. However, Stellar is 13.89 times more volatile than SPDR Russell 1000. It trades about 0.26 of its potential returns per unit of risk. SPDR Russell 1000 is currently generating about 0.02 per unit of risk. If you would invest  9.01  in Stellar on October 9, 2024 and sell it today you would earn a total of  34.99  from holding Stellar or generate 388.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.83%
Values	Daily Returns

Stellar  vs.  SPDR Russell 1000

Stellar

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Stellar are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady primary indicators, Stellar exhibited solid returns over the last few months and may actually be approaching a breakup point.

SPDR Russell 1000

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Russell 1000 are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, SPDR Russell is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Stellar and SPDR Russell

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

The idea behind Stellar and SPDR Russell 1000 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.

Check out your portfolio center.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.