Correlation Between SPDR Russell and Rocket CompaniesInc

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

Diversification Opportunities for SPDR Russell and Rocket CompaniesInc

0.68

Correlation Coefficient

SPDR Russell  Rocket CompaniesInc

Poor diversification

The 3 months correlation between SPDR and Rocket is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Russell 1000 and Rocket CompaniesInc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rocket CompaniesInc 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 Rocket CompaniesInc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rocket CompaniesInc has no effect on the direction of SPDR Russell i.e., SPDR Russell and Rocket CompaniesInc go up and down completely randomly.

Pair Corralation between SPDR Russell and Rocket CompaniesInc

Given the investment horizon of 90 days SPDR Russell is expected to generate 2.78 times less return on investment than Rocket CompaniesInc. But when comparing it to its historical volatility, SPDR Russell 1000 is 3.9 times less risky than Rocket CompaniesInc. It trades about 0.09 of its potential returns per unit of risk. Rocket CompaniesInc is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  869.00  in Rocket CompaniesInc on January 26, 2024 and sell it today you would earn a total of  386.00  from holding Rocket CompaniesInc or generate 44.42% return on investment over 90 days.

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

SPDR Russell 1000  vs.  Rocket CompaniesInc

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.

Rocket CompaniesInc

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Rocket CompaniesInc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent forward-looking signals, Rocket CompaniesInc may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with SPDR Russell and Rocket CompaniesInc

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

The idea behind SPDR Russell 1000 and Rocket CompaniesInc 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .