Correlation Between United States and SPDR SP

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Can any of the company-specific risk be diversified away by investing in both United States 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 United States and SPDR SP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United States Copper and SPDR SP Metals, you can compare the effects of market volatilities on United States 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 United States with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of United States and SPDR SP.

Diversification Opportunities for United States and SPDR SP

0.29
  Correlation Coefficient

Modest diversification

The 3 months correlation between United and SPDR is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding United States Copper and SPDR SP Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Metals and United States 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 United States Copper 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 Metals has no effect on the direction of United States i.e., United States and SPDR SP go up and down completely randomly.

Pair Corralation between United States and SPDR SP

Given the investment horizon of 90 days United States Copper is expected to generate 0.72 times more return on investment than SPDR SP. However, United States Copper is 1.39 times less risky than SPDR SP. It trades about 0.03 of its potential returns per unit of risk. SPDR SP Metals is currently generating about -0.43 per unit of risk. If you would invest  2,659  in United States Copper on October 12, 2024 and sell it today you would earn a total of  15.00  from holding United States Copper or generate 0.56% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

United States Copper  vs.  SPDR SP Metals

 Performance 
       Timeline  
United States Copper 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days United States Copper has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, United States is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.
SPDR SP Metals 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days SPDR SP Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's primary indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

United States and SPDR SP Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with United States and SPDR SP

The main advantage of trading using opposite United States and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United States 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.
The idea behind United States Copper and SPDR SP Metals pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.

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