SPY vs IVV

[Kyle Benton]

Can you explain the stellar performance of a stock pair like SPY vs IVV— the sharpe ratio is 10 and I get a warning that suggest "the backtest may indicate inflated performance due to to consolidated price noise."  I feel it has something to do with dividends, are you not adjusting price for dividends?

KB

[admin]

Hello,

please take a look here:

https://www.pairtradinglab.com/faq#ptl-website-spy-voo
https://www.pairtradinglab.com/faq#ptl-website-consolidated-prices

[Kyle Benton]

Admin,

Thanks for the prompt reply, this is helpful.  I read through the FAQ.

If I may, I'd like a slight clarification regarding your data:

Data provided by data^HQ system (all US equities) is adjusted for all capital-related corporate actions - splits, reverse splits, capital returns, special dividends, stock dividends, demergers and spin-offs. Data is not adjusted for ordinary divindends as this would not be correct.

So on one hand it's adjusted for "stock dividends", but not "ordinary dividends."  Excuse my ignorance, but my impression was that a stock dividend was an ordinary dividends.  What is the distinction?

KB

[admin]

From Investopedia:

What is a 'Stock Dividend'
A stock dividend is a dividend payment made in the form of additional shares rather than a cash payout, also known as a "scrip dividend." Companies may decide to distribute this type of dividend to shareholders of record if the company's availability of liquid cash is in short supply. These distributions are generally acknowledged in the form of fractions paid per existing share, such as if a company issued a stock dividend of 0.05 shares for each single share held by existing shareholders.