Correlation Between SPDR Dow and IShares SP
Can any of the company-specific risk be diversified away by investing in both SPDR Dow and IShares 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 Dow and IShares SP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR Dow Jones and iShares SP 500, you can compare the effects of market volatilities on SPDR Dow and IShares 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 Dow with a short position of IShares SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Dow and IShares SP.
Diversification Opportunities for SPDR Dow and IShares SP
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between SPDR and IShares is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Dow Jones and iShares SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares SP 500 and SPDR Dow 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 Dow Jones are associated (or correlated) with IShares SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares SP 500 has no effect on the direction of SPDR Dow i.e., SPDR Dow and IShares SP go up and down completely randomly.
Pair Corralation between SPDR Dow and IShares SP
Assuming the 90 days trading horizon SPDR Dow Jones is expected to generate 0.99 times more return on investment than IShares SP. However, SPDR Dow Jones is 1.01 times less risky than IShares SP. It trades about 0.34 of its potential returns per unit of risk. iShares SP 500 is currently generating about 0.24 per unit of risk. If you would invest 39,161 in SPDR Dow Jones on August 27, 2024 and sell it today you would earn a total of 3,494 from holding SPDR Dow Jones or generate 8.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR Dow Jones vs. iShares SP 500
Performance |
| Timeline |
| SPDR Dow Jones |
| iShares SP 500 |
SPDR Dow and IShares SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR Dow and IShares SP
The main advantage of trading using opposite SPDR Dow and IShares SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR Dow position performs unexpectedly, IShares 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 IShares SP will offset losses from the drop in IShares SP's long position.| SPDR Dow vs. SPDR MSCI World | SPDR Dow vs. SPDR SP Dividend | SPDR Dow vs. SPDR SP 500 | SPDR Dow vs. SPDR BB SB |
| IShares SP vs. SPDR Dow Jones | IShares SP vs. iShares China CNY | IShares SP vs. iShares Core MSCI | IShares SP vs. iShares MSCI EM |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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