Correlation Between SPDR SP and DWTR

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

By analyzing existing cross correlation between SPDR SP 400 and DWTR, you can compare the effects of market volatilities on SPDR SP and DWTR 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 DWTR. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and DWTR.

Diversification Opportunities for SPDR SP and DWTR

0.0

Correlation Coefficient

SPDR SP  DWTR

Pay attention - limited upside

The 3 months correlation between SPDR and DWTR is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP 400 and DWTR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DWTR 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 400 are associated (or correlated) with DWTR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DWTR has no effect on the direction of SPDR SP i.e., SPDR SP and DWTR go up and down completely randomly.

Pair Corralation between SPDR SP and DWTR

If you would invest (100.00) in DWTR on January 29, 2024 and sell it today you would earn a total of  100.00  from holding DWTR or generate -100.0% return on investment over 90 days.

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

SPDR SP 400  vs.  DWTR

SPDR SP 400

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP 400 are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, SPDR SP may actually be approaching a critical reversion point that can send shares even higher in May 2024.

DWTR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DWTR has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, DWTR is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with SPDR SP and DWTR

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

The idea behind SPDR SP 400 and DWTR 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.