Correlation Between SPDR SP and United States

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

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

Diversification Opportunities for SPDR SP and United States

0.29

Correlation Coefficient

SPDR SP  United States

Modest diversification

The 3 months correlation between SPDR and United is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP Metals and United States Copper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United States Copper 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 Metals are associated (or correlated) with United States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United States Copper has no effect on the direction of SPDR SP i.e., SPDR SP and United States go up and down completely randomly.

Pair Corralation between SPDR SP and United States

Considering the 90-day investment horizon SPDR SP Metals is expected to under-perform the United States. In addition to that, SPDR SP is 1.39 times more volatile than United States Copper. It trades about -0.43 of its total potential returns per unit of risk. United States Copper is currently generating about 0.03 per unit of volatility. If you would invest  2,659  in United States Copper on October 12, 2024 and sell it today you would earn a total of  15.00  from holding United States Copper or generate 0.56% return on investment over 90 days.

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

SPDR SP Metals  vs.  United States Copper

SPDR SP Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR SP Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's primary indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

United States Copper

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United States Copper has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, United States is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with SPDR SP and United States

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

The idea behind SPDR SP Metals and United States Copper 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.