Correlation Between SPDR SP and XWEB

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

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

Diversification Opportunities for SPDR SP and XWEB

0.85

Correlation Coefficient

SPDR SP  XWEB

Very poor diversification

The 3 months correlation between SPDR and XWEB is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP Transportation and XWEB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XWEB and SPDR SP 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 SP Transportation are associated (or correlated) with XWEB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XWEB has no effect on the direction of SPDR SP i.e., SPDR SP and XWEB go up and down completely randomly.

Pair Corralation between SPDR SP and XWEB

If you would invest  7,886  in SPDR SP Transportation on September 15, 2024 and sell it today you would earn a total of  1,192  from holding SPDR SP Transportation or generate 15.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	1.56%
Values	Daily Returns

SPDR SP Transportation  vs.  XWEB

SPDR SP Transportation

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP Transportation are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, SPDR SP displayed solid returns over the last few months and may actually be approaching a breakup point.

XWEB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days XWEB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, XWEB is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with SPDR SP and XWEB

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

The idea behind SPDR SP Transportation and XWEB 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.