Correlation Between SPDR SP and Technology Select
Can any of the company-specific risk be diversified away by investing in both SPDR SP and Technology Select 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 Technology Select 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 Technology Select Sector, you can compare the effects of market volatilities on SPDR SP and Technology Select 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 Technology Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and Technology Select.
Diversification Opportunities for SPDR SP and Technology Select
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between SPDR and Technology is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP 500 and Technology Select Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Technology Select Sector 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 Technology Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Technology Select Sector has no effect on the direction of SPDR SP i.e., SPDR SP and Technology Select go up and down completely randomly.
Pair Corralation between SPDR SP and Technology Select
Considering the 90-day investment horizon SPDR SP 500 is expected to generate 0.64 times more return on investment than Technology Select. However, SPDR SP 500 is 1.56 times less risky than Technology Select. It trades about 0.15 of its potential returns per unit of risk. Technology Select Sector is currently generating about 0.07 per unit of risk. If you would invest 57,924 in SPDR SP 500 on August 25, 2024 and sell it today you would earn a total of 1,627 from holding SPDR SP 500 or generate 2.81% 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 500 vs. Technology Select Sector
Performance |
| Timeline |
| SPDR SP 500 |
| Technology Select Sector |
SPDR SP and Technology Select Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR SP and Technology Select
The main advantage of trading using opposite SPDR SP and Technology Select positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP position performs unexpectedly, Technology Select 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 Technology Select will offset losses from the drop in Technology Select's long position.| SPDR SP vs. FT Vest Equity | SPDR SP vs. Northern Lights | SPDR SP vs. Dimensional International High | SPDR SP vs. First Trust Exchange Traded |
| Technology Select vs. First Trust Exchange Traded | Technology Select vs. Ultimus Managers Trust | Technology Select vs. Horizon Kinetics Medical | Technology Select vs. Harbor Health Care |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
Other Complementary Tools
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges | |
| Portfolio File Import Quickly import all of your third-party portfolios from your local drive in csv format | |
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Money Managers Screen money managers from public funds and ETFs managed around the world | |
| Technical Analysis Check basic technical indicators and analysis based on most latest market data |