Correlation Between SPDR SP and IShares Oil

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

Diversification Opportunities for SPDR SP and IShares Oil

0.79

Correlation Coefficient

SPDR SP  IShares Oil

Poor diversification

The 3 months correlation between SPDR and IShares is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP Metals and iShares Oil Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Oil Gas 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 IShares Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Oil Gas has no effect on the direction of SPDR SP i.e., SPDR SP and IShares Oil go up and down completely randomly.

Pair Corralation between SPDR SP and IShares Oil

Considering the 90-day investment horizon SPDR SP Metals is expected to under-perform the IShares Oil. In addition to that, SPDR SP is 1.17 times more volatile than iShares Oil Gas. It trades about -0.09 of its total potential returns per unit of risk. iShares Oil Gas is currently generating about -0.06 per unit of volatility. If you would invest  9,794  in iShares Oil Gas on October 7, 2024 and sell it today you would lose (601.00) from holding iShares Oil Gas or give up 6.14% of portfolio value over 90 days.

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

SPDR SP Metals  vs.  iShares Oil Gas

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.

iShares Oil Gas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Oil Gas has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, IShares Oil is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with SPDR SP and IShares Oil

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

The idea behind SPDR SP Metals and iShares Oil Gas 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.