Correlation Between SPDR Dow and SPDR SP
Can any of the company-specific risk be diversified away by investing in both SPDR Dow 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 SPDR Dow and SPDR SP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR Dow Jones and SPDR SP 500, you can compare the effects of market volatilities on SPDR Dow 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 SPDR Dow with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Dow and SPDR SP.
Diversification Opportunities for SPDR Dow and SPDR SP
Excellent diversification
The 3 months correlation between SPDR and SPDR is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Dow Jones and SPDR SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP 500 and SPDR Dow 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 Dow Jones 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 500 has no effect on the direction of SPDR Dow i.e., SPDR Dow and SPDR SP go up and down completely randomly.
Pair Corralation between SPDR Dow and SPDR SP
Assuming the 90 days trading horizon SPDR Dow is expected to generate 237.87 times less return on investment than SPDR SP. But when comparing it to its historical volatility, SPDR Dow Jones is 1.05 times less risky than SPDR SP. It trades about 0.0 of its potential returns per unit of risk. SPDR SP 500 is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 1,027 in SPDR SP 500 on August 28, 2024 and sell it today you would earn a total of 133.00 from holding SPDR SP 500 or generate 12.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR Dow Jones vs. SPDR SP 500
Performance |
| Timeline |
| SPDR Dow Jones |
| SPDR SP 500 |
SPDR Dow and SPDR SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR Dow and SPDR SP
The main advantage of trading using opposite SPDR Dow and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR Dow 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.| SPDR Dow vs. Vanguard FTSE Developed | SPDR Dow vs. Leverage Shares 2x | SPDR Dow vs. Amundi Index Solutions | SPDR Dow vs. Amundi Index Solutions |
| SPDR SP vs. Leverage Shares 3x | SPDR SP vs. Leverage Shares 3x | SPDR SP vs. Leverage Shares 3x | SPDR SP vs. WisdomTree Short GBP |
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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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