Correlation Between Technology Select and SPDR SP
Can any of the company-specific risk be diversified away by investing in both Technology Select 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 Technology Select and SPDR SP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Technology Select Sector and SPDR SP Kensho, you can compare the effects of market volatilities on Technology Select 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 Technology Select with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Technology Select and SPDR SP.
Diversification Opportunities for Technology Select and SPDR SP
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Technology and SPDR is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Technology Select Sector and SPDR SP Kensho in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Kensho and Technology Select 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 Technology Select Sector 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 Kensho has no effect on the direction of Technology Select i.e., Technology Select and SPDR SP go up and down completely randomly.
Pair Corralation between Technology Select and SPDR SP
Considering the 90-day investment horizon Technology Select is expected to generate 1.65 times less return on investment than SPDR SP. But when comparing it to its historical volatility, Technology Select Sector is 1.21 times less risky than SPDR SP. It trades about 0.06 of its potential returns per unit of risk. SPDR SP Kensho is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 2,725 in SPDR SP Kensho on November 18, 2024 and sell it today you would earn a total of 220.00 from holding SPDR SP Kensho or generate 8.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Technology Select Sector vs. SPDR SP Kensho
Performance |
| Timeline |
| Technology Select Sector |
| SPDR SP Kensho |
Technology Select and SPDR SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Technology Select and SPDR SP
The main advantage of trading using opposite Technology Select and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Technology Select 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.| Technology Select vs. First Trust Technology | Technology Select vs. Fidelity MSCI Information | Technology Select vs. First Trust Nasdaq | Technology Select vs. iShares Expanded Tech Software |
| SPDR SP vs. iShares Dividend and | SPDR SP vs. Martin Currie Sustainable | SPDR SP vs. VictoryShares THB Mid | SPDR SP vs. Mast Global Battery |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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