Correlation Between SPDR SP and PowerShares

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

By analyzing existing cross correlation between SPDR SP 500 and PowerShares, you can compare the effects of market volatilities on SPDR SP and PowerShares 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 PowerShares. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and PowerShares.

Diversification Opportunities for SPDR SP and PowerShares

0.0

Correlation Coefficient

SPDR SP  PowerShares

Pay attention - limited upside

The 3 months correlation between SPDR and PowerShares is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP 500 and PowerShares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PowerShares 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 500 are associated (or correlated) with PowerShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PowerShares has no effect on the direction of SPDR SP i.e., SPDR SP and PowerShares go up and down completely randomly.

Pair Corralation between SPDR SP and PowerShares

If you would invest  58,575  in SPDR SP 500 on September 16, 2024 and sell it today you would earn a total of  1,846  from holding SPDR SP 500 or generate 3.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

SPDR SP 500  vs.  PowerShares

SPDR SP 500

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP 500 are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, SPDR SP may actually be approaching a critical reversion point that can send shares even higher in January 2025.

PowerShares

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PowerShares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, PowerShares is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with SPDR SP and PowerShares

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

The idea behind SPDR SP 500 and PowerShares 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.