Correlation Between SPDR Bloomberg and Energy Select

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

By analyzing existing cross correlation between SPDR Bloomberg International and Energy Select Sector, you can compare the effects of market volatilities on SPDR Bloomberg and Energy Select 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 Bloomberg with a short position of Energy Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Bloomberg and Energy Select.

Diversification Opportunities for SPDR Bloomberg and Energy Select

-0.71

Correlation Coefficient

SPDR Bloomberg  Energy Select

Pay attention - limited upside

The 3 months correlation between SPDR and Energy is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Bloomberg International and Energy Select Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Select Sector and SPDR Bloomberg 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 Bloomberg International are associated (or correlated) with Energy Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Select Sector has no effect on the direction of SPDR Bloomberg i.e., SPDR Bloomberg and Energy Select go up and down completely randomly.

Pair Corralation between SPDR Bloomberg and Energy Select

Given the investment horizon of 90 days SPDR Bloomberg International is expected to generate 0.39 times more return on investment than Energy Select. However, SPDR Bloomberg International is 2.54 times less risky than Energy Select. It trades about 0.06 of its potential returns per unit of risk. Energy Select Sector is currently generating about 0.02 per unit of risk. If you would invest  2,670  in SPDR Bloomberg International on February 10, 2025 and sell it today you would earn a total of  425.00  from holding SPDR Bloomberg International or generate 15.92% return on investment over 90 days.

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

SPDR Bloomberg International  vs.  Energy Select Sector

SPDR Bloomberg Inter

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Bloomberg International are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, SPDR Bloomberg may actually be approaching a critical reversion point that can send shares even higher in June 2025.

Energy Select Sector

Risk-Adjusted Performance

Very Weak

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

Pair Trading with SPDR Bloomberg and Energy Select

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

The idea behind SPDR Bloomberg International and Energy Select Sector 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.