Correlation Between SPDR Dow and IShares Telecommunicatio
Can any of the company-specific risk be diversified away by investing in both SPDR Dow and IShares Telecommunicatio 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 IShares Telecommunicatio 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 iShares Telecommunications ETF, you can compare the effects of market volatilities on SPDR Dow and IShares Telecommunicatio 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 IShares Telecommunicatio. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Dow and IShares Telecommunicatio.
Diversification Opportunities for SPDR Dow and IShares Telecommunicatio
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between SPDR and IShares is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Dow Jones and iShares Telecommunications ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IShares Telecommunicatio 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 IShares Telecommunicatio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IShares Telecommunicatio has no effect on the direction of SPDR Dow i.e., SPDR Dow and IShares Telecommunicatio go up and down completely randomly.
Pair Corralation between SPDR Dow and IShares Telecommunicatio
Considering the 90-day investment horizon SPDR Dow Jones is expected to under-perform the IShares Telecommunicatio. In addition to that, SPDR Dow is 1.1 times more volatile than iShares Telecommunications ETF. It trades about -0.01 of its total potential returns per unit of risk. iShares Telecommunications ETF is currently generating about 0.04 per unit of volatility. If you would invest 2,785 in iShares Telecommunications ETF on December 3, 2024 and sell it today you would earn a total of 55.00 from holding iShares Telecommunications ETF or generate 1.97% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
SPDR Dow Jones vs. iShares Telecommunications ETF
Performance |
Timeline |
SPDR Dow Jones |
IShares Telecommunicatio |
SPDR Dow and IShares Telecommunicatio Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with SPDR Dow and IShares Telecommunicatio
The main advantage of trading using opposite SPDR Dow and IShares Telecommunicatio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR Dow position performs unexpectedly, IShares Telecommunicatio 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 Telecommunicatio will offset losses from the drop in IShares Telecommunicatio's long position.SPDR Dow vs. iShares Cohen Steers | SPDR Dow vs. iShares Real Estate | SPDR Dow vs. SPDR Dow Jones | SPDR Dow vs. iShares Utilities ETF |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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