Correlation Between SPDR SP and Advisors Inner

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Can any of the company-specific risk be diversified away by investing in both SPDR SP and Advisors Inner 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 SP and Advisors Inner into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR SP 500 and Advisors Inner Circle, you can compare the effects of market volatilities on SPDR SP and Advisors Inner 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 SP with a short position of Advisors Inner. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and Advisors Inner.

Diversification Opportunities for SPDR SP and Advisors Inner

0.6
  Correlation Coefficient

Poor diversification

The 3 months correlation between SPDR and Advisors is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP 500 and Advisors Inner Circle in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advisors Inner Circle and SPDR SP 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 SP 500 are associated (or correlated) with Advisors Inner. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advisors Inner Circle has no effect on the direction of SPDR SP i.e., SPDR SP and Advisors Inner go up and down completely randomly.

Pair Corralation between SPDR SP and Advisors Inner

Considering the 90-day investment horizon SPDR SP 500 is expected to generate 2.5 times more return on investment than Advisors Inner. However, SPDR SP is 2.5 times more volatile than Advisors Inner Circle. It trades about 0.04 of its potential returns per unit of risk. Advisors Inner Circle is currently generating about 0.07 per unit of risk. If you would invest  41,468  in SPDR SP 500 on January 18, 2024 and sell it today you would earn a total of  8,885  from holding SPDR SP 500 or generate 21.43% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy66.53%
ValuesDaily Returns

SPDR SP 500  vs.  Advisors Inner Circle

 Performance 
       Timeline  
SPDR SP 500 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP 500 are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, SPDR SP is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.
Advisors Inner Circle 

Risk-Adjusted Performance

14 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Advisors Inner Circle are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Advisors Inner may actually be approaching a critical reversion point that can send shares even higher in May 2024.

SPDR SP and Advisors Inner Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with SPDR SP and Advisors Inner

The main advantage of trading using opposite SPDR SP and Advisors Inner positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP position performs unexpectedly, Advisors Inner 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 Advisors Inner will offset losses from the drop in Advisors Inner's long position.
The idea behind SPDR SP 500 and Advisors Inner Circle 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..

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