Correlation Between SPDR SP and Schwab Fundamental
Can any of the company-specific risk be diversified away by investing in both SPDR SP and Schwab Fundamental 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 Schwab Fundamental into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR SP Dividend and Schwab Fundamental Large, you can compare the effects of market volatilities on SPDR SP and Schwab Fundamental 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 Schwab Fundamental. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and Schwab Fundamental.
Diversification Opportunities for SPDR SP and Schwab Fundamental
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between SPDR and Schwab is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP Dividend and Schwab Fundamental Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schwab Fundamental Large 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 Dividend are associated (or correlated) with Schwab Fundamental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schwab Fundamental Large has no effect on the direction of SPDR SP i.e., SPDR SP and Schwab Fundamental go up and down completely randomly.
Pair Corralation between SPDR SP and Schwab Fundamental
Considering the 90-day investment horizon SPDR SP Dividend is expected to generate 1.06 times more return on investment than Schwab Fundamental. However, SPDR SP is 1.06 times more volatile than Schwab Fundamental Large. It trades about -0.02 of its potential returns per unit of risk. Schwab Fundamental Large is currently generating about -0.1 per unit of risk. If you would invest 12,852 in SPDR SP Dividend on January 25, 2024 and sell it today you would lose (46.00) from holding SPDR SP Dividend or give up 0.36% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
SPDR SP Dividend vs. Schwab Fundamental Large
Performance |
| Timeline |
| SPDR SP Dividend |
| Schwab Fundamental Large |
SPDR SP and Schwab Fundamental Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR SP and Schwab Fundamental
The main advantage of trading using opposite SPDR SP and Schwab Fundamental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP position performs unexpectedly, Schwab Fundamental 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 Schwab Fundamental will offset losses from the drop in Schwab Fundamental's long position.| SPDR SP vs. SPDR Russell 1000 | SPDR SP vs. SPDR MSCI USA | SPDR SP vs. SPDR MSCI EAFE | SPDR SP vs. SPDR SSGA Large |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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