Correlation Between Burford Capital and SPDR SP

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

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

Diversification Opportunities for Burford Capital and SPDR SP

0.29

Correlation Coefficient

Burford Capital  SPDR SP

Modest diversification

The 3 months correlation between Burford and SPDR is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Burford Capital 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 Burford Capital 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 Burford Capital 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 Burford Capital i.e., Burford Capital and SPDR SP go up and down completely randomly.

Pair Corralation between Burford Capital and SPDR SP

Considering the 90-day investment horizon Burford Capital is expected to generate 3.62 times more return on investment than SPDR SP. However, Burford Capital is 3.62 times more volatile than SPDR SP 500. It trades about 0.0 of its potential returns per unit of risk. SPDR SP 500 is currently generating about -0.28 per unit of risk. If you would invest  1,494  in Burford Capital on January 20, 2024 and sell it today you would lose (8.00) from holding Burford Capital or give up 0.54% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.65%
Values	Daily Returns

Burford Capital  vs.  SPDR SP 500

Burford Capital

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Burford Capital are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Burford Capital is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

SPDR SP 500

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP 500 are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, SPDR SP is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Burford Capital and SPDR SP

The main advantage of trading using opposite Burford Capital and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Burford Capital 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 Burford Capital and SPDR SP 500 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.

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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.