Correlation Between SPDR SP and Barclays Capital

Can any of the company-specific risk be diversified away by investing in both SPDR SP and Barclays Capital 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 Barclays Capital 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 Barclays Capital, you can compare the effects of market volatilities on SPDR SP and Barclays Capital 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 Barclays Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and Barclays Capital.

Diversification Opportunities for SPDR SP and Barclays Capital

-0.41

Correlation Coefficient

SPDR SP  Barclays Capital

Very good diversification

The 3 months correlation between SPDR and Barclays is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP 500 and Barclays Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barclays Capital 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 Barclays Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barclays Capital has no effect on the direction of SPDR SP i.e., SPDR SP and Barclays Capital go up and down completely randomly.

Pair Corralation between SPDR SP and Barclays Capital

Considering the 90-day investment horizon SPDR SP 500 is expected to generate 0.82 times more return on investment than Barclays Capital. However, SPDR SP 500 is 1.22 times less risky than Barclays Capital. It trades about 0.13 of its potential returns per unit of risk. Barclays Capital is currently generating about -0.07 per unit of risk. If you would invest  37,318  in SPDR SP 500 on September 20, 2024 and sell it today you would earn a total of  23,111  from holding SPDR SP 500 or generate 61.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	28.28%
Values	Daily Returns

SPDR SP 500  vs.  Barclays Capital

SPDR SP 500

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP 500 are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. 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.

Barclays Capital

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with SPDR SP and Barclays Capital

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

The idea behind SPDR SP 500 and Barclays Capital 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.