Correlation Between SPDR MSCI and SPDR SP
Can any of the company-specific risk be diversified away by investing in both SPDR MSCI 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 MSCI 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 MSCI ACWI and SPDR SP International, you can compare the effects of market volatilities on SPDR MSCI 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 MSCI with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR MSCI and SPDR SP.
Diversification Opportunities for SPDR MSCI and SPDR SP
Very poor diversification
The 3 months correlation between SPDR and SPDR is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding SPDR MSCI ACWI and SPDR SP International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP International and SPDR 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 SPDR MSCI ACWI 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 International has no effect on the direction of SPDR MSCI i.e., SPDR MSCI and SPDR SP go up and down completely randomly.
Pair Corralation between SPDR MSCI and SPDR SP
Considering the 90-day investment horizon SPDR MSCI ACWI is expected to under-perform the SPDR SP. In addition to that, SPDR MSCI is 1.14 times more volatile than SPDR SP International. It trades about -0.18 of its total potential returns per unit of risk. SPDR SP International is currently generating about -0.07 per unit of volatility. If you would invest 3,237 in SPDR SP International on August 28, 2024 and sell it today you would lose (37.00) from holding SPDR SP International or give up 1.14% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR MSCI ACWI vs. SPDR SP International
Performance |
| Timeline |
| SPDR MSCI ACWI |
| SPDR SP International |
SPDR MSCI and SPDR SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR MSCI and SPDR SP
The main advantage of trading using opposite SPDR MSCI and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR MSCI 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.| SPDR MSCI vs. Dimensional Core Equity | SPDR MSCI vs. Dimensional Emerging Core | SPDR MSCI vs. Dimensional Targeted Value | SPDR MSCI vs. Dimensional Small Cap |
| SPDR SP vs. Dimensional ETF Trust | SPDR SP vs. Vanguard Small Cap Index | SPDR SP vs. First Trust Multi Manager | SPDR SP vs. Vanguard SP Small Cap |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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