Correlation Between IShares Oil and SPDR SP
Can any of the company-specific risk be diversified away by investing in both IShares Oil 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 IShares Oil and SPDR SP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Oil Equipment and SPDR SP Oil, you can compare the effects of market volatilities on IShares Oil 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 IShares Oil with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Oil and SPDR SP.
Diversification Opportunities for IShares Oil and SPDR SP
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and SPDR is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding iShares Oil Equipment and SPDR SP Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Oil and IShares Oil 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 iShares Oil Equipment 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 Oil has no effect on the direction of IShares Oil i.e., IShares Oil and SPDR SP go up and down completely randomly.
Pair Corralation between IShares Oil and SPDR SP
Considering the 90-day investment horizon IShares Oil is expected to generate 1.34 times less return on investment than SPDR SP. In addition to that, IShares Oil is 1.22 times more volatile than SPDR SP Oil. It trades about 0.03 of its total potential returns per unit of risk. SPDR SP Oil is currently generating about 0.05 per unit of volatility. If you would invest 12,751 in SPDR SP Oil on September 2, 2024 and sell it today you would earn a total of 1,797 from holding SPDR SP Oil or generate 14.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Oil Equipment vs. SPDR SP Oil
Performance |
| Timeline |
| iShares Oil Equipment |
| SPDR SP Oil |
IShares Oil and SPDR SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Oil and SPDR SP
The main advantage of trading using opposite IShares Oil and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Oil 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.| IShares Oil vs. First Trust Exchange Traded | IShares Oil vs. Ultimus Managers Trust | IShares Oil vs. Horizon Kinetics Medical | IShares Oil vs. Harbor Health Care |
| SPDR SP vs. VanEck Oil Services | SPDR SP vs. SPDR SP Metals | SPDR SP vs. Energy Select Sector | SPDR SP vs. SPDR SP Retail |
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 Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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