Correlation Between SPDR Russell and MicroAlgo

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

By analyzing existing cross correlation between SPDR Russell 1000 and MicroAlgo, you can compare the effects of market volatilities on SPDR Russell and MicroAlgo 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 Russell with a short position of MicroAlgo. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Russell and MicroAlgo.

Diversification Opportunities for SPDR Russell and MicroAlgo

0.71

Correlation Coefficient

SPDR Russell  MicroAlgo

Poor diversification

The 3 months correlation between SPDR and MicroAlgo is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Russell 1000 and MicroAlgo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MicroAlgo and SPDR Russell 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 Russell 1000 are associated (or correlated) with MicroAlgo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MicroAlgo has no effect on the direction of SPDR Russell i.e., SPDR Russell and MicroAlgo go up and down completely randomly.

Pair Corralation between SPDR Russell and MicroAlgo

Given the investment horizon of 90 days SPDR Russell 1000 is expected to generate 0.14 times more return on investment than MicroAlgo. However, SPDR Russell 1000 is 7.22 times less risky than MicroAlgo. It trades about -0.19 of its potential returns per unit of risk. MicroAlgo is currently generating about -0.42 per unit of risk. If you would invest  11,352  in SPDR Russell 1000 on January 26, 2024 and sell it today you would lose (365.70) from holding SPDR Russell 1000 or give up 3.22% of portfolio value over 90 days.

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

SPDR Russell 1000  vs.  MicroAlgo

SPDR Russell 1000

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Russell 1000 are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, SPDR Russell is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

MicroAlgo

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MicroAlgo are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical and fundamental indicators, MicroAlgo displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SPDR Russell and MicroAlgo

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

The idea behind SPDR Russell 1000 and MicroAlgo 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.

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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.