Correlation Between SPDR SP and IShares Oil
Can any of the company-specific risk be diversified away by investing in both SPDR SP and IShares Oil 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 IShares Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR SP Oil and iShares Oil Gas, you can compare the effects of market volatilities on SPDR SP and IShares Oil 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 IShares Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and IShares Oil.
Diversification Opportunities for SPDR SP and IShares Oil
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between SPDR and IShares is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP Oil and iShares Oil Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Oil Gas 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 Oil are associated (or correlated) with IShares Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Oil Gas has no effect on the direction of SPDR SP i.e., SPDR SP and IShares Oil go up and down completely randomly.
Pair Corralation between SPDR SP and IShares Oil
Considering the 90-day investment horizon SPDR SP is expected to generate 1.05 times less return on investment than IShares Oil. In addition to that, SPDR SP is 1.09 times more volatile than iShares Oil Gas. It trades about 0.02 of its total potential returns per unit of risk. iShares Oil Gas is currently generating about 0.03 per unit of volatility. If you would invest 8,738 in iShares Oil Gas on August 27, 2024 and sell it today you would earn a total of 1,445 from holding iShares Oil Gas or generate 16.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR SP Oil vs. iShares Oil Gas
Performance |
| Timeline |
| SPDR SP Oil |
| iShares Oil Gas |
SPDR SP and IShares Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR SP and IShares Oil
The main advantage of trading using opposite SPDR SP and IShares Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP position performs unexpectedly, IShares Oil 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 Oil will offset losses from the drop in IShares Oil's long position.| SPDR SP vs. VanEck Oil Services | SPDR SP vs. SPDR SP Metals | SPDR SP vs. Energy Select Sector | SPDR SP vs. SPDR SP Retail |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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