Correlation Between SPDR SP and SPDR ICE

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

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

Diversification Opportunities for SPDR SP and SPDR ICE

0.71

Correlation Coefficient

SPDR SP  SPDR ICE

Poor diversification

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

Pair Corralation between SPDR SP and SPDR ICE

Assuming the 90 days trading horizon SPDR SP Materials is expected to generate 9.47 times more return on investment than SPDR ICE. However, SPDR SP is 9.47 times more volatile than SPDR ICE BofA. It trades about 0.14 of its potential returns per unit of risk. SPDR ICE BofA is currently generating about 0.24 per unit of risk. If you would invest  3,477  in SPDR SP Materials on April 22, 2025 and sell it today you would earn a total of  328.00  from holding SPDR SP Materials or generate 9.43% return on investment over 90 days.

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

SPDR SP Materials  vs.  SPDR ICE BofA

SPDR SP Materials

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP Materials are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, SPDR SP may actually be approaching a critical reversion point that can send shares even higher in August 2025.

SPDR ICE BofA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR ICE BofA are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, SPDR ICE is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with SPDR SP and SPDR ICE

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

The idea behind SPDR SP Materials and SPDR ICE BofA 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.