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 Semiconductor, 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
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Technology and SPDR is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Technology Select Sector and SPDR SP Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Semiconductor 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 Semiconductor 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 Sector is expected to generate 0.63 times more return on investment than SPDR SP. However, Technology Select Sector is 1.6 times less risky than SPDR SP. It trades about 0.08 of its potential returns per unit of risk. SPDR SP Semiconductor is currently generating about 0.03 per unit of risk. If you would invest 16,402 in Technology Select Sector on August 27, 2024 and sell it today you would earn a total of 6,958 from holding Technology Select Sector or generate 42.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Technology Select Sector vs. SPDR SP Semiconductor
Performance |
| Timeline |
| Technology Select Sector |
| SPDR SP Semiconductor |
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 Exchange Traded | Technology Select vs. Ultimus Managers Trust | Technology Select vs. Horizon Kinetics Medical | Technology Select vs. Harbor Health Care |
| SPDR SP vs. Invesco Dynamic Semiconductors | SPDR SP vs. iShares Semiconductor ETF | SPDR SP vs. SPDR SP Software | SPDR SP vs. SPDR SP Pharmaceuticals |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
Other Complementary Tools
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios | |
| Companies Directory Evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals | |
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges |