Correlation Between SPDR Portfolio and ETF Series
Can any of the company-specific risk be diversified away by investing in both SPDR Portfolio and ETF Series 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 Portfolio and ETF Series into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR Portfolio SP and ETF Series Solutions, you can compare the effects of market volatilities on SPDR Portfolio and ETF Series 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 Portfolio with a short position of ETF Series. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Portfolio and ETF Series.
Diversification Opportunities for SPDR Portfolio and ETF Series
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between SPDR and ETF is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Portfolio SP and ETF Series Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETF Series Solutions and SPDR Portfolio 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 Portfolio SP are associated (or correlated) with ETF Series. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETF Series Solutions has no effect on the direction of SPDR Portfolio i.e., SPDR Portfolio and ETF Series go up and down completely randomly.
Pair Corralation between SPDR Portfolio and ETF Series
Given the investment horizon of 90 days SPDR Portfolio SP is expected to generate 0.97 times more return on investment than ETF Series. However, SPDR Portfolio SP is 1.03 times less risky than ETF Series. It trades about 0.16 of its potential returns per unit of risk. ETF Series Solutions is currently generating about 0.14 per unit of risk. If you would invest 4,863 in SPDR Portfolio SP on September 1, 2024 and sell it today you would earn a total of 664.00 from holding SPDR Portfolio SP or generate 13.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.21% |
| Values | Daily Returns |
SPDR Portfolio SP vs. ETF Series Solutions
Performance |
| Timeline |
| SPDR Portfolio SP |
| ETF Series Solutions |
SPDR Portfolio and ETF Series Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR Portfolio and ETF Series
The main advantage of trading using opposite SPDR Portfolio and ETF Series positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR Portfolio position performs unexpectedly, ETF Series 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 ETF Series will offset losses from the drop in ETF Series' long position.| SPDR Portfolio vs. SPDR Portfolio SP | SPDR Portfolio vs. SPDR Portfolio SP | SPDR Portfolio vs. SPDR Portfolio SP | SPDR Portfolio vs. SPDR SP 600 |
| ETF Series vs. iShares Core SP | ETF Series vs. iShares Core MSCI | ETF Series vs. iShares Broad USD | ETF Series vs. iShares Core SP |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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