Correlation Between SPDR Dow and SPDR Series

Can any of the company-specific risk be diversified away by investing in both SPDR Dow and SPDR Series 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 Dow and SPDR Series into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SPDR Dow Jones and SPDR Series Trust, you can compare the effects of market volatilities on SPDR Dow and SPDR Series 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 Dow with a short position of SPDR Series. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Dow and SPDR Series.

Diversification Opportunities for SPDR Dow and SPDR Series

0.42

Correlation Coefficient

SPDR Dow  SPDR Series

Very weak diversification

The 3 months correlation between SPDR and SPDR is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Dow Jones and SPDR Series Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Series Trust and SPDR Dow 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 Dow Jones are associated (or correlated) with SPDR Series. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Series Trust has no effect on the direction of SPDR Dow i.e., SPDR Dow and SPDR Series go up and down completely randomly.

Pair Corralation between SPDR Dow and SPDR Series

Assuming the 90 days trading horizon SPDR Dow Jones is expected to under-perform the SPDR Series. In addition to that, SPDR Dow is 4.27 times more volatile than SPDR Series Trust. It trades about -0.15 of its total potential returns per unit of risk. SPDR Series Trust is currently generating about 0.27 per unit of volatility. If you would invest  120,411  in SPDR Series Trust on October 8, 2024 and sell it today you would earn a total of  1,089  from holding SPDR Series Trust or generate 0.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	94.12%
Values	Daily Returns

SPDR Dow Jones  vs.  SPDR Series Trust

SPDR Dow Jones

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Dow Jones are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, SPDR Dow may actually be approaching a critical reversion point that can send shares even higher in February 2025.

SPDR Series Trust

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Series Trust are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical and fundamental indicators, SPDR Series is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with SPDR Dow and SPDR Series

The main advantage of trading using opposite SPDR Dow and SPDR Series positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR Dow position performs unexpectedly, SPDR Series 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 Series will offset losses from the drop in SPDR Series' long position.

The idea behind SPDR Dow Jones and SPDR Series Trust 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 Commodity Directory module to find actively traded commodities issued by global exchanges.