Correlation Between SPDR Barclays and SPDR SP

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

By analyzing existing cross correlation between SPDR Barclays Intermediate and SPDR SP Oil, you can compare the effects of market volatilities on SPDR Barclays and SPDR SP 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 Barclays with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Barclays and SPDR SP.

Diversification Opportunities for SPDR Barclays and SPDR SP

0.69

Correlation Coefficient

SPDR Barclays  SPDR SP

Poor diversification

The 3 months correlation between SPDR and SPDR is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Barclays Intermediate and SPDR SP Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Oil and SPDR Barclays 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 Barclays Intermediate are associated (or correlated) with SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP Oil has no effect on the direction of SPDR Barclays i.e., SPDR Barclays and SPDR SP go up and down completely randomly.

Pair Corralation between SPDR Barclays and SPDR SP

Given the investment horizon of 90 days SPDR Barclays is expected to generate 6.06 times less return on investment than SPDR SP. But when comparing it to its historical volatility, SPDR Barclays Intermediate is 8.39 times less risky than SPDR SP. It trades about 0.19 of its potential returns per unit of risk. SPDR SP Oil is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  11,431  in SPDR SP Oil on May 2, 2025 and sell it today you would earn a total of  1,539  from holding SPDR SP Oil or generate 13.46% return on investment over 90 days.

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

SPDR Barclays Intermediate  vs.  SPDR SP Oil

SPDR Barclays Interm

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Barclays Intermediate are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong forward indicators, SPDR Barclays is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

SPDR SP Oil

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP Oil are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, SPDR SP reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SPDR Barclays and SPDR SP

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

The idea behind SPDR Barclays Intermediate and SPDR SP Oil 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.