Correlation Between IShares MSCI and SPDR Portfolio
Can any of the company-specific risk be diversified away by investing in both IShares MSCI and SPDR Portfolio 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 IShares MSCI and SPDR Portfolio into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares MSCI Global and SPDR Portfolio MSCI, you can compare the effects of market volatilities on IShares MSCI and SPDR Portfolio 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 IShares MSCI with a short position of SPDR Portfolio. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and SPDR Portfolio.
Diversification Opportunities for IShares MSCI and SPDR Portfolio
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IShares and SPDR is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI Global and SPDR Portfolio MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Portfolio MSCI and IShares MSCI 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 iShares MSCI Global are associated (or correlated) with SPDR Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Portfolio MSCI has no effect on the direction of IShares MSCI i.e., IShares MSCI and SPDR Portfolio go up and down completely randomly.
Pair Corralation between IShares MSCI and SPDR Portfolio
Given the investment horizon of 90 days IShares MSCI is expected to generate 1.3 times less return on investment than SPDR Portfolio. But when comparing it to its historical volatility, iShares MSCI Global is 1.35 times less risky than SPDR Portfolio. It trades about 0.3 of its potential returns per unit of risk. SPDR Portfolio MSCI is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 6,346 in SPDR Portfolio MSCI on September 2, 2024 and sell it today you would earn a total of 251.00 from holding SPDR Portfolio MSCI or generate 3.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares MSCI Global vs. SPDR Portfolio MSCI
Performance |
| Timeline |
| iShares MSCI Global |
| SPDR Portfolio MSCI |
IShares MSCI and SPDR Portfolio Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares MSCI and SPDR Portfolio
The main advantage of trading using opposite IShares MSCI and SPDR Portfolio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI position performs unexpectedly, SPDR Portfolio 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 Portfolio will offset losses from the drop in SPDR Portfolio's long position.| IShares MSCI vs. iShares MSCI Emerging | IShares MSCI vs. BMO Long Federal | IShares MSCI vs. iShares MSCI EAFE | IShares MSCI vs. Vanguard Total Market |
| SPDR Portfolio vs. WisdomTree Interest Rate | SPDR Portfolio vs. First Trust Developed | SPDR Portfolio vs. VictoryShares International Volatility | SPDR Portfolio vs. Aquagold International |
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 the Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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