Correlation Between SPDR SP and ETFS Commodity

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

By analyzing existing cross correlation between SPDR SP 500 and ETFS Commodity Securities, you can compare the effects of market volatilities on SPDR SP and ETFS Commodity 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 ETFS Commodity. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and ETFS Commodity.

Diversification Opportunities for SPDR SP and ETFS Commodity

0.0

Correlation Coefficient

SPDR SP  ETFS Commodity

Pay attention - limited upside

The 3 months correlation between SPDR and ETFS is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP 500 and ETFS Commodity Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETFS Commodity Securities 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 500 are associated (or correlated) with ETFS Commodity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETFS Commodity Securities has no effect on the direction of SPDR SP i.e., SPDR SP and ETFS Commodity go up and down completely randomly.

Pair Corralation between SPDR SP and ETFS Commodity

If you would invest (100.00) in ETFS Commodity Securities on December 5, 2024 and sell it today you would earn a total of  100.00  from holding ETFS Commodity Securities or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

SPDR SP 500  vs.  ETFS Commodity Securities

SPDR SP 500

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, SPDR SP is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

ETFS Commodity Securities

Risk-Adjusted Performance

Very Weak

Over the last 90 days ETFS Commodity Securities has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, ETFS Commodity is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with SPDR SP and ETFS Commodity

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

The idea behind SPDR SP 500 and ETFS Commodity Securities 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.

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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.