Correlation Between XWEB and SPDR SP

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

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

Diversification Opportunities for XWEB and SPDR SP

0.85

Correlation Coefficient

XWEB  SPDR SP

Very poor diversification

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

Pair Corralation between XWEB and SPDR SP

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

XWEB  vs.  SPDR SP Transportation

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.

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.

Pair Trading with XWEB and SPDR SP

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

The idea behind XWEB and SPDR SP Transportation 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.