Correlation Between SPDR SP and SPDR Portfolio

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

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

Diversification Opportunities for SPDR SP and SPDR Portfolio

-0.76

Correlation Coefficient

SPDR SP  SPDR Portfolio

Pay attention - limited upside

The 3 months correlation between SPDR and SPDR is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP Regional and SPDR Portfolio SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Portfolio SP 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 Regional are associated (or correlated) with SPDR Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Portfolio SP has no effect on the direction of SPDR SP i.e., SPDR SP and SPDR Portfolio go up and down completely randomly.

Pair Corralation between SPDR SP and SPDR Portfolio

Assuming the 90 days trading horizon SPDR SP Regional is expected to under-perform the SPDR Portfolio. In addition to that, SPDR SP is 1.95 times more volatile than SPDR Portfolio SP. It trades about -0.14 of its total potential returns per unit of risk. SPDR Portfolio SP is currently generating about 0.17 per unit of volatility. If you would invest  125,428  in SPDR Portfolio SP on April 24, 2025 and sell it today you would earn a total of  12,448  from holding SPDR Portfolio SP or generate 9.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

SPDR SP Regional  vs.  SPDR Portfolio SP

SPDR SP Regional

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR SP Regional has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Etf's technical and fundamental indicators remain fairly strong which may send shares a bit higher in August 2025. The current disturbance may also be a sign of long term up-swing for the ETF investors.

SPDR Portfolio SP

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Portfolio SP are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, SPDR Portfolio may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with SPDR SP and SPDR Portfolio

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

The idea behind SPDR SP Regional and SPDR Portfolio SP 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.

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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.