Correlation Between IShares Emerging and SPDR SP
Can any of the company-specific risk be diversified away by investing in both IShares Emerging 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 IShares Emerging and SPDR SP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Emerging Markets and SPDR SP International, you can compare the effects of market volatilities on IShares Emerging 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 IShares Emerging with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Emerging and SPDR SP.
Diversification Opportunities for IShares Emerging and SPDR SP
-0.09 | Correlation Coefficient |
Good diversification
The 3 months correlation between IShares and SPDR is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding iShares Emerging Markets 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 IShares Emerging 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 Emerging Markets 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 IShares Emerging i.e., IShares Emerging and SPDR SP go up and down completely randomly.
Pair Corralation between IShares Emerging and SPDR SP
Given the investment horizon of 90 days iShares Emerging Markets is expected to under-perform the SPDR SP. In addition to that, IShares Emerging is 1.45 times more volatile than SPDR SP International. It trades about -0.15 of its total potential returns per unit of risk. SPDR SP International is currently generating about 0.06 per unit of volatility. If you would invest 3,657 in SPDR SP International on September 2, 2024 and sell it today you would earn a total of 28.00 from holding SPDR SP International or generate 0.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Emerging Markets vs. SPDR SP International
Performance |
| Timeline |
| iShares Emerging Markets |
| SPDR SP International |
IShares Emerging and SPDR SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Emerging and SPDR SP
The main advantage of trading using opposite IShares Emerging and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Emerging 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.| IShares Emerging vs. Franklin Templeton ETF | IShares Emerging vs. Altrius Global Dividend | IShares Emerging vs. Invesco Exchange Traded | IShares Emerging vs. Franklin International Core |
| SPDR SP vs. SPDR SP Emerging | SPDR SP vs. iShares International Select | SPDR SP vs. First Trust Dow | SPDR SP vs. Invesco International Dividend |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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