Correlation Between Burford Capital and SPDR Portfolio

Can any of the company-specific risk be diversified away by investing in both Burford Capital and SPDR Portfolio 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 Portfolio 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 Portfolio SP, you can compare the effects of market volatilities on Burford Capital and SPDR Portfolio 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 Portfolio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Burford Capital and SPDR Portfolio.

Diversification Opportunities for Burford Capital and SPDR Portfolio

0.25

Correlation Coefficient

Burford Capital  SPDR Portfolio

Modest diversification

The 3 months correlation between Burford and SPDR is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Burford Capital and SPDR Portfolio SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Portfolio SP 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 Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Portfolio SP has no effect on the direction of Burford Capital i.e., Burford Capital and SPDR Portfolio go up and down completely randomly.

Pair Corralation between Burford Capital and SPDR Portfolio

Considering the 90-day investment horizon Burford Capital is expected to generate 2.29 times more return on investment than SPDR Portfolio. However, Burford Capital is 2.29 times more volatile than SPDR Portfolio SP. It trades about 0.03 of its potential returns per unit of risk. SPDR Portfolio SP is currently generating about -0.17 per unit of risk. If you would invest  1,502  in Burford Capital on January 25, 2024 and sell it today you would earn a total of  16.00  from holding Burford Capital or generate 1.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Burford Capital  vs.  SPDR Portfolio SP

Burford Capital

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Burford Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Burford Capital is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

SPDR Portfolio SP

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Portfolio SP are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, SPDR Portfolio is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Burford Capital and SPDR Portfolio

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

The idea behind Burford Capital and SPDR Portfolio SP 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.