Correlation Between SPDR SP and IShares Transportation
Can any of the company-specific risk be diversified away by investing in both SPDR SP and IShares Transportation 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 Transportation into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR SP Retail and iShares Transportation Average, you can compare the effects of market volatilities on SPDR SP and IShares Transportation 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 Transportation. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and IShares Transportation.
Diversification Opportunities for SPDR SP and IShares Transportation
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SPDR and IShares is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP Retail and iShares Transportation Average in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Transportation 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 Retail are associated (or correlated) with IShares Transportation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Transportation has no effect on the direction of SPDR SP i.e., SPDR SP and IShares Transportation go up and down completely randomly.
Pair Corralation between SPDR SP and IShares Transportation
Considering the 90-day investment horizon SPDR SP is expected to generate 1.38 times less return on investment than IShares Transportation. But when comparing it to its historical volatility, SPDR SP Retail is 1.14 times less risky than IShares Transportation. It trades about 0.1 of its potential returns per unit of risk. iShares Transportation Average is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 6,868 in iShares Transportation Average on August 25, 2024 and sell it today you would earn a total of 490.00 from holding iShares Transportation Average or generate 7.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR SP Retail vs. iShares Transportation Average
Performance |
| Timeline |
| SPDR SP Retail |
| iShares Transportation |
SPDR SP and IShares Transportation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR SP and IShares Transportation
The main advantage of trading using opposite SPDR SP and IShares Transportation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP position performs unexpectedly, IShares Transportation 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 Transportation will offset losses from the drop in IShares Transportation's long position.| SPDR SP vs. SPDR SP Homebuilders | SPDR SP vs. Consumer Discretionary Select | SPDR SP vs. SPDR SP Metals | SPDR SP vs. Industrial Select Sector |
| IShares Transportation vs. Gabelli ETFs Trust | IShares Transportation vs. First Trust Exchange Traded | IShares Transportation vs. Northern Lights | IShares Transportation vs. First Trust Exchange Traded |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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