Correlation Between SP 500 and SNDL

Can any of the company-specific risk be diversified away by investing in both SP 500 and SNDL 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 SP 500 and SNDL into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SP 500 MINI and SNDL Inc, you can compare the effects of market volatilities on SP 500 and SNDL 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 SP 500 with a short position of SNDL. Check out your portfolio center. Please also check ongoing floating volatility patterns of SP 500 and SNDL.

Diversification Opportunities for SP 500 and SNDL

-0.53

Correlation Coefficient

SP 500  SNDL

Excellent diversification

The 3 months correlation between XSP and SNDL is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding SP 500 MINI and SNDL Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SNDL Inc and SP 500 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 SP 500 MINI are associated (or correlated) with SNDL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SNDL Inc has no effect on the direction of SP 500 i.e., SP 500 and SNDL go up and down completely randomly.

Pair Corralation between SP 500 and SNDL

Assuming the 90 days trading horizon SP 500 MINI is expected to generate 0.19 times more return on investment than SNDL. However, SP 500 MINI is 5.15 times less risky than SNDL. It trades about 0.1 of its potential returns per unit of risk. SNDL Inc is currently generating about 0.01 per unit of risk. If you would invest  39,991  in SP 500 MINI on October 4, 2024 and sell it today you would earn a total of  18,825  from holding SP 500 MINI or generate 47.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

SP 500 MINI  vs.  SNDL Inc

Pair Trading with SP 500 and SNDL

The main advantage of trading using opposite SP 500 and SNDL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SP 500 position performs unexpectedly, SNDL 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 SNDL will offset losses from the drop in SNDL's long position.

The idea behind SP 500 MINI and SNDL Inc 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.