Correlation Between SPDR SP and IShares Technology

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

By analyzing existing cross correlation between SPDR SP Oil and iShares Technology ETF, you can compare the effects of market volatilities on SPDR SP and IShares Technology 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 Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and IShares Technology.

Diversification Opportunities for SPDR SP and IShares Technology

0.57

Correlation Coefficient

SPDR SP  IShares Technology

Very weak diversification

The 3 months correlation between SPDR and IShares is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP Oil and iShares Technology ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Technology ETF 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 Oil are associated (or correlated) with IShares Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Technology ETF has no effect on the direction of SPDR SP i.e., SPDR SP and IShares Technology go up and down completely randomly.

Pair Corralation between SPDR SP and IShares Technology

Considering the 90-day investment horizon SPDR SP Oil is expected to generate 0.93 times more return on investment than IShares Technology. However, SPDR SP Oil is 1.08 times less risky than IShares Technology. It trades about 0.05 of its potential returns per unit of risk. iShares Technology ETF is currently generating about -0.1 per unit of risk. If you would invest  12,780  in SPDR SP Oil on December 27, 2024 and sell it today you would earn a total of  535.00  from holding SPDR SP Oil or generate 4.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

SPDR SP Oil  vs.  iShares Technology ETF

SPDR SP Oil

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP Oil are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, SPDR SP is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

iShares Technology ETF

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Technology ETF has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Etf's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the fund sophisticated investors.

Pair Trading with SPDR SP and IShares Technology

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

The idea behind SPDR SP Oil and iShares Technology ETF 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.