Correlation Between SPDR Series and Communication Services

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

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

Diversification Opportunities for SPDR Series and Communication Services

0.55

Correlation Coefficient

SPDR Series  Communication Services

Very weak diversification

The 3 months correlation between SPDR and Communication is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Series Trust and Communication Services Select in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Communication Services and SPDR Series 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 Series Trust are associated (or correlated) with Communication Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Communication Services has no effect on the direction of SPDR Series i.e., SPDR Series and Communication Services go up and down completely randomly.

Pair Corralation between SPDR Series and Communication Services

Given the investment horizon of 90 days SPDR Series is expected to generate 3.73 times less return on investment than Communication Services. But when comparing it to its historical volatility, SPDR Series Trust is 1.11 times less risky than Communication Services. It trades about 0.06 of its potential returns per unit of risk. Communication Services Select is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  10,163  in Communication Services Select on May 18, 2025 and sell it today you would earn a total of  985.00  from holding Communication Services Select or generate 9.69% return on investment over 90 days.

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

SPDR Series Trust  vs.  Communication Services Select

SPDR Series Trust

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Series Trust are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, SPDR Series is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Communication Services

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Communication Services Select are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady essential indicators, Communication Services may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with SPDR Series and Communication Services

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

The idea behind SPDR Series Trust and Communication Services Select 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.