Correlation Between EA Series and SPDR SP

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Can any of the company-specific risk be diversified away by investing in both EA Series 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 EA Series and SPDR SP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EA Series Trust and SPDR SP Retail, you can compare the effects of market volatilities on EA Series 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 EA Series with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of EA Series and SPDR SP.

Diversification Opportunities for EA Series and SPDR SP

0.42
  Correlation Coefficient

Very weak diversification

The 3 months correlation between DRLL and SPDR is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding EA Series Trust and SPDR SP Retail in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Retail and EA Series 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 EA Series Trust 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 Retail has no effect on the direction of EA Series i.e., EA Series and SPDR SP go up and down completely randomly.

Pair Corralation between EA Series and SPDR SP

Given the investment horizon of 90 days EA Series Trust is expected to under-perform the SPDR SP. But the etf apears to be less risky and, when comparing its historical volatility, EA Series Trust is 1.02 times less risky than SPDR SP. The etf trades about -0.19 of its potential returns per unit of risk. The SPDR SP Retail is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  7,498  in SPDR SP Retail on August 4, 2024 and sell it today you would earn a total of  45.00  from holding SPDR SP Retail or generate 0.6% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

EA Series Trust  vs.  SPDR SP Retail

 Performance 
       Timeline  
EA Series Trust 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in EA Series Trust are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, EA Series is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.
SPDR SP Retail 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP Retail are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, SPDR SP is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

EA Series and SPDR SP Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with EA Series and SPDR SP

The main advantage of trading using opposite EA Series and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EA Series 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 EA Series Trust and SPDR SP Retail 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.

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