Correlation Between SPDR Dow and IShares MSCI
Can any of the company-specific risk be diversified away by investing in both SPDR Dow and IShares MSCI 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 MSCI 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 MSCI World, you can compare the effects of market volatilities on SPDR Dow and IShares MSCI 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 MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Dow and IShares MSCI.
Diversification Opportunities for SPDR Dow and IShares MSCI
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SPDR and IShares is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Dow Jones and iShares MSCI World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI World 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 MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares MSCI World has no effect on the direction of SPDR Dow i.e., SPDR Dow and IShares MSCI go up and down completely randomly.
Pair Corralation between SPDR Dow and IShares MSCI
Assuming the 90 days trading horizon SPDR Dow Jones is expected to generate 0.95 times more return on investment than IShares MSCI. However, SPDR Dow Jones is 1.06 times less risky than IShares MSCI. It trades about 0.38 of its potential returns per unit of risk. iShares MSCI World is currently generating about 0.16 per unit of risk. If you would invest 38,896 in SPDR Dow Jones on September 2, 2024 and sell it today you would earn a total of 3,769 from holding SPDR Dow Jones or generate 9.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR Dow Jones vs. iShares MSCI World
Performance |
| Timeline |
| SPDR Dow Jones |
| iShares MSCI World |
SPDR Dow and IShares MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR Dow and IShares MSCI
The main advantage of trading using opposite SPDR Dow and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR Dow position performs unexpectedly, IShares MSCI 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 MSCI will offset losses from the drop in IShares MSCI's long position.| SPDR Dow vs. iShares Core MSCI | SPDR Dow vs. BlackRock ESG Multi Asset | SPDR Dow vs. Pershing Square Holdings | SPDR Dow vs. ASML Holding NV |
| IShares MSCI vs. iShares Core MSCI | IShares MSCI vs. BlackRock ESG Multi Asset | IShares MSCI vs. Pershing Square Holdings | IShares MSCI vs. ASML Holding NV |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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