Correlation Between SPDR Portfolio and Nasdaq 100

Can any of the company-specific risk be diversified away by investing in both SPDR Portfolio and Nasdaq 100 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 Portfolio and Nasdaq 100 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SPDR Portfolio SP and Nasdaq 100 Index Fund, you can compare the effects of market volatilities on SPDR Portfolio and Nasdaq 100 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 Portfolio with a short position of Nasdaq 100. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Portfolio and Nasdaq 100.

Diversification Opportunities for SPDR Portfolio and Nasdaq 100

0.94

Correlation Coefficient

SPDR Portfolio  Nasdaq 100

Almost no diversification

The 3 months correlation between SPDR and Nasdaq is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Portfolio SP and Nasdaq 100 Index Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nasdaq 100 Index and SPDR Portfolio 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 Portfolio SP are associated (or correlated) with Nasdaq 100. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nasdaq 100 Index has no effect on the direction of SPDR Portfolio i.e., SPDR Portfolio and Nasdaq 100 go up and down completely randomly.

Pair Corralation between SPDR Portfolio and Nasdaq 100

Given the investment horizon of 90 days SPDR Portfolio is expected to generate 1.38 times less return on investment than Nasdaq 100. But when comparing it to its historical volatility, SPDR Portfolio SP is 1.34 times less risky than Nasdaq 100. It trades about 0.05 of its potential returns per unit of risk. Nasdaq 100 Index Fund is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,510  in Nasdaq 100 Index Fund on January 20, 2024 and sell it today you would earn a total of  838.00  from holding Nasdaq 100 Index Fund or generate 33.39% return on investment over 90 days.

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

SPDR Portfolio SP  vs.  Nasdaq 100 Index Fund

SPDR Portfolio SP

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Portfolio SP are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable essential indicators, SPDR Portfolio is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Nasdaq 100 Index

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nasdaq 100 Index Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward-looking signals, Nasdaq 100 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with SPDR Portfolio and Nasdaq 100

The main advantage of trading using opposite SPDR Portfolio and Nasdaq 100 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR Portfolio position performs unexpectedly, Nasdaq 100 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 Nasdaq 100 will offset losses from the drop in Nasdaq 100's long position.

The idea behind SPDR Portfolio SP and Nasdaq 100 Index Fund 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.