Correlation Between Xtrackers and SPDR SP

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

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

Diversification Opportunities for Xtrackers and SPDR SP

-0.66

Correlation Coefficient

Xtrackers  SPDR SP

Excellent diversification

The 3 months correlation between Xtrackers and SPDR is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers II and SPDR SP Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Utilities and Xtrackers 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 Xtrackers II are associated (or correlated) with SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP Utilities has no effect on the direction of Xtrackers i.e., Xtrackers and SPDR SP go up and down completely randomly.

Pair Corralation between Xtrackers and SPDR SP

Assuming the 90 days trading horizon Xtrackers II is expected to under-perform the SPDR SP. But the etf apears to be less risky and, when comparing its historical volatility, Xtrackers II is 1.7 times less risky than SPDR SP. The etf trades about -0.12 of its potential returns per unit of risk. The SPDR SP Utilities is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  4,190  in SPDR SP Utilities on September 4, 2024 and sell it today you would earn a total of  534.00  from holding SPDR SP Utilities or generate 12.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	96.92%
Values	Daily Returns

Xtrackers II   vs.  SPDR SP Utilities

Xtrackers II

Risk-Adjusted Performance

0 of 100

Very Weak

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

SPDR SP Utilities

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP Utilities are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, SPDR SP may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Xtrackers and SPDR SP

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

The idea behind Xtrackers II and SPDR SP Utilities 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..