Correlation Between PBSM and SPDR SP
Can any of the company-specific risk be diversified away by investing in both PBSM 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 PBSM and SPDR SP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PBSM and SPDR SP 500, you can compare the effects of market volatilities on PBSM 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 PBSM with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of PBSM and SPDR SP.
Diversification Opportunities for PBSM and SPDR SP
Excellent diversification
The 3 months correlation between PBSM and SPDR is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding PBSM and SPDR SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP 500 and PBSM 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 PBSM 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 500 has no effect on the direction of PBSM i.e., PBSM and SPDR SP go up and down completely randomly.
Pair Corralation between PBSM and SPDR SP
Given the investment horizon of 90 days PBSM is expected to generate 2.61 times less return on investment than SPDR SP. In addition to that, PBSM is 1.35 times more volatile than SPDR SP 500. It trades about 0.02 of its total potential returns per unit of risk. SPDR SP 500 is currently generating about 0.07 per unit of volatility. If you would invest 37,056 in SPDR SP 500 on January 19, 2024 and sell it today you would earn a total of 12,999 from holding SPDR SP 500 or generate 35.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 56.14% |
| Values | Daily Returns |
PBSM vs. SPDR SP 500
Performance |
| Timeline |
| PBSM |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| SPDR SP 500 |
PBSM and SPDR SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PBSM and SPDR SP
The main advantage of trading using opposite PBSM and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PBSM 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.| PBSM vs. Vanguard Mid Cap Index | PBSM vs. Vanguard Small Cap Value | PBSM vs. Vanguard FTSE Emerging | PBSM vs. Vanguard Large Cap Index |
| SPDR SP vs. Dimensional Targeted Value | SPDR SP vs. Dimensional World ex | SPDR SP vs. Dimensional Small Cap |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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