Correlation Between SP 500 and Utilities Alphadex

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Can any of the company-specific risk be diversified away by investing in both SP 500 and Utilities Alphadex 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 SP 500 and Utilities Alphadex into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SP 500 Utilities and Utilities Alphadex ETF, you can compare the effects of market volatilities on SP 500 and Utilities Alphadex 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 SP 500 with a short position of Utilities Alphadex. Check out your portfolio center. Please also check ongoing floating volatility patterns of SP 500 and Utilities Alphadex.

Diversification Opportunities for SP 500 and Utilities Alphadex

0.95
  Correlation Coefficient

Almost no diversification

The 3 months correlation between SP 500 and Utilities is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding SP 500 Utilities and Utilities Alphadex ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Utilities Alphadex ETF and SP 500 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 SP 500 Utilities are associated (or correlated) with Utilities Alphadex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Utilities Alphadex ETF has no effect on the direction of SP 500 i.e., SP 500 and Utilities Alphadex go up and down completely randomly.

Pair Corralation between SP 500 and Utilities Alphadex

Considering the 90-day investment horizon SP 500 Utilities is expected to under-perform the Utilities Alphadex. But the etf apears to be less risky and, when comparing its historical volatility, SP 500 Utilities is 1.01 times less risky than Utilities Alphadex. The etf trades about -0.2 of its potential returns per unit of risk. The Utilities Alphadex ETF is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest  3,429  in Utilities Alphadex ETF on July 6, 2022 and sell it today you would lose (192.00)  from holding Utilities Alphadex ETF or give up 5.6% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

SP 500 Utilities  vs.  Utilities Alphadex ETF

 Performance (%) 
       Timeline  
SP 500 Utilities 
SP 500 Performance
0 of 100
Over the last 90 days SP 500 Utilities has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, SP 500 is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

SP 500 Price Channel

Utilities Alphadex ETF 
Utilities Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Utilities Alphadex ETF are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Utilities Alphadex is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Utilities Price Channel

SP 500 and Utilities Alphadex Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with SP 500 and Utilities Alphadex

The main advantage of trading using opposite SP 500 and Utilities Alphadex positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SP 500 position performs unexpectedly, Utilities Alphadex 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 Utilities Alphadex will offset losses from the drop in Utilities Alphadex's long position.
SP 500 vs. Home Depot
The idea behind SP 500 Utilities and Utilities Alphadex ETF 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.
Utilities Alphadex vs. Home Depot
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 CEO Directory module to screen CEOs from public companies around the world.

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