Correlation Between SPDR SP and Db X

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

By analyzing existing cross correlation between SPDR SP Materials and db x trackers MSCI, you can compare the effects of market volatilities on SPDR SP and Db X 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 Db X. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and Db X.

Diversification Opportunities for SPDR SP and Db X

-0.55

Correlation Coefficient

SPDR SP  Db X

Excellent diversification

The 3 months correlation between SPDR and XWLD is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP Materials and db x trackers MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on db x trackers 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 Materials are associated (or correlated) with Db X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of db x trackers has no effect on the direction of SPDR SP i.e., SPDR SP and Db X go up and down completely randomly.

Pair Corralation between SPDR SP and Db X

Assuming the 90 days trading horizon SPDR SP is expected to generate 1.86 times less return on investment than Db X. In addition to that, SPDR SP is 1.44 times more volatile than db x trackers MSCI. It trades about 0.05 of its total potential returns per unit of risk. db x trackers MSCI is currently generating about 0.12 per unit of volatility. If you would invest  716,000  in db x trackers MSCI on October 24, 2024 and sell it today you would earn a total of  266,450  from holding db x trackers MSCI or generate 37.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

SPDR SP Materials  vs.  db x trackers MSCI

SPDR SP Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR SP Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, SPDR SP is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

db x trackers

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in db x trackers MSCI are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Db X may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with SPDR SP and Db X

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

The idea behind SPDR SP Materials and db x trackers MSCI 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.