Correlation Between SPDR SP and DBX ETF
Can any of the company-specific risk be diversified away by investing in both SPDR SP and DBX ETF 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 DBX ETF into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR SP 400 and DBX ETF Trust, you can compare the effects of market volatilities on SPDR SP and DBX ETF 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 DBX ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and DBX ETF.
Diversification Opportunities for SPDR SP and DBX ETF
No risk reduction
The 3 months correlation between SPDR and DBX is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP 400 and DBX ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DBX ETF Trust 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 400 are associated (or correlated) with DBX ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DBX ETF Trust has no effect on the direction of SPDR SP i.e., SPDR SP and DBX ETF go up and down completely randomly.
Pair Corralation between SPDR SP and DBX ETF
Given the investment horizon of 90 days SPDR SP 400 is expected to generate 1.04 times more return on investment than DBX ETF. However, SPDR SP is 1.04 times more volatile than DBX ETF Trust. It trades about 0.05 of its potential returns per unit of risk. DBX ETF Trust is currently generating about 0.05 per unit of risk. If you would invest 6,593 in SPDR SP 400 on August 23, 2024 and sell it today you would earn a total of 1,716 from holding SPDR SP 400 or generate 26.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR SP 400 vs. DBX ETF Trust
Performance |
| Timeline |
| SPDR SP 400 |
| DBX ETF Trust |
SPDR SP and DBX ETF Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR SP and DBX ETF
The main advantage of trading using opposite SPDR SP and DBX ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP position performs unexpectedly, DBX ETF 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 DBX ETF will offset losses from the drop in DBX ETF's long position.| SPDR SP vs. First Trust Small | SPDR SP vs. First Trust Mid | SPDR SP vs. First Trust Small | SPDR SP vs. First Trust Large |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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