Correlation Between Xtrackers MSCI and SPDR Portfolio
Can any of the company-specific risk be diversified away by investing in both Xtrackers 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 Xtrackers 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 Xtrackers MSCI Europe and SPDR Portfolio Europe, you can compare the effects of market volatilities on Xtrackers 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 Xtrackers MSCI with a short position of SPDR Portfolio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers MSCI and SPDR Portfolio.
Diversification Opportunities for Xtrackers MSCI and SPDR Portfolio
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Xtrackers and SPDR is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers MSCI Europe and SPDR Portfolio Europe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Portfolio Europe and Xtrackers 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 Xtrackers MSCI Europe 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 Europe has no effect on the direction of Xtrackers MSCI i.e., Xtrackers MSCI and SPDR Portfolio go up and down completely randomly.
Pair Corralation between Xtrackers MSCI and SPDR Portfolio
Given the investment horizon of 90 days Xtrackers MSCI is expected to generate 1.07 times less return on investment than SPDR Portfolio. But when comparing it to its historical volatility, Xtrackers MSCI Europe is 1.52 times less risky than SPDR Portfolio. It trades about 0.67 of its potential returns per unit of risk. SPDR Portfolio Europe is currently generating about 0.47 of returns per unit of risk over similar time horizon. If you would invest 3,967 in SPDR Portfolio Europe on November 3, 2024 and sell it today you would earn a total of 303.00 from holding SPDR Portfolio Europe or generate 7.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Xtrackers MSCI Europe vs. SPDR Portfolio Europe
Performance |
| Timeline |
| Xtrackers MSCI Europe |
| SPDR Portfolio Europe |
Xtrackers MSCI and SPDR Portfolio Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Xtrackers MSCI and SPDR Portfolio
The main advantage of trading using opposite Xtrackers MSCI and SPDR Portfolio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xtrackers 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.| Xtrackers MSCI vs. Xtrackers MSCI Japan | Xtrackers MSCI vs. iShares Currency Hedged | Xtrackers MSCI vs. Xtrackers MSCI EAFE | Xtrackers MSCI vs. WisdomTree Europe Hedged |
| SPDR Portfolio vs. Franklin FTSE Europe | SPDR Portfolio vs. SPDR Portfolio MSCI | SPDR Portfolio vs. iShares Core MSCI | SPDR Portfolio vs. JPMorgan BetaBuilders Europe |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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