Correlation Between SPDR Dow and IShares Utilities
Can any of the company-specific risk be diversified away by investing in both SPDR Dow and IShares Utilities 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 IShares Utilities 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 iShares Utilities ETF, you can compare the effects of market volatilities on SPDR Dow and IShares Utilities 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 IShares Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Dow and IShares Utilities.
Diversification Opportunities for SPDR Dow and IShares Utilities
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between SPDR and IShares is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Dow Jones and iShares Utilities ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Utilities ETF 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 IShares Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Utilities ETF has no effect on the direction of SPDR Dow i.e., SPDR Dow and IShares Utilities go up and down completely randomly.
Pair Corralation between SPDR Dow and IShares Utilities
Considering the 90-day investment horizon SPDR Dow is expected to generate 9.88 times less return on investment than IShares Utilities. But when comparing it to its historical volatility, SPDR Dow Jones is 1.02 times less risky than IShares Utilities. It trades about 0.01 of its potential returns per unit of risk. iShares Utilities ETF is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 7,962 in iShares Utilities ETF on August 31, 2024 and sell it today you would earn a total of 2,595 from holding iShares Utilities ETF or generate 32.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR Dow Jones vs. iShares Utilities ETF
Performance |
| Timeline |
| SPDR Dow Jones |
| iShares Utilities ETF |
SPDR Dow and IShares Utilities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR Dow and IShares Utilities
The main advantage of trading using opposite SPDR Dow and IShares Utilities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR Dow position performs unexpectedly, IShares Utilities 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 IShares Utilities will offset losses from the drop in IShares Utilities' long position.| SPDR Dow vs. South Plains Financial | SPDR Dow vs. Red River Bancshares | SPDR Dow vs. NI Holdings | SPDR Dow vs. Western New England |
| IShares Utilities vs. iShares Industrials ETF | IShares Utilities vs. iShares Consumer Discretionary | IShares Utilities vs. iShares Consumer Staples | IShares Utilities vs. iShares Telecommunications ETF |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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