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 Oil and iShares Oil Equipment, 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
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between SPDR and IShares is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP Oil and iShares Oil Equipment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Oil Equipment 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 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 Equipment 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 Oil is expected to generate 0.7 times more return on investment than IShares Oil. However, SPDR SP Oil is 1.42 times less risky than IShares Oil. It trades about 0.08 of its potential returns per unit of risk. iShares Oil Equipment is currently generating about -0.11 per unit of risk. If you would invest 15,600 in SPDR SP Oil on February 1, 2024 and sell it today you would earn a total of 201.00 from holding SPDR SP Oil or generate 1.29% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
SPDR SP Oil vs. iShares Oil Equipment
Performance |
Timeline |
SPDR SP Oil |
iShares Oil Equipment |
SPDR SP and IShares Oil Volatility Contrast
Predicted Return Density |
Returns |
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.SPDR SP vs. Strive 500 ETF | SPDR SP vs. Rumble Inc | SPDR SP vs. HUMANA INC | SPDR SP vs. Aquagold International |
IShares Oil vs. Strive 500 ETF | IShares Oil vs. Rumble Inc | IShares Oil vs. HUMANA INC | IShares Oil vs. Aquagold International |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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