Correlation Between IShares MSCI and SPDR SSGA
Can any of the company-specific risk be diversified away by investing in both IShares MSCI and SPDR SSGA 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 MSCI and SPDR SSGA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares MSCI EAFE and SPDR SSGA Small, you can compare the effects of market volatilities on IShares MSCI and SPDR SSGA 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 MSCI with a short position of SPDR SSGA. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and SPDR SSGA.
Diversification Opportunities for IShares MSCI and SPDR SSGA
-0.79 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between IShares and SPDR is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI EAFE and SPDR SSGA Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SSGA Small and IShares 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 iShares MSCI EAFE are associated (or correlated) with SPDR SSGA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SSGA Small has no effect on the direction of IShares MSCI i.e., IShares MSCI and SPDR SSGA go up and down completely randomly.
Pair Corralation between IShares MSCI and SPDR SSGA
Given the investment horizon of 90 days iShares MSCI EAFE is expected to under-perform the SPDR SSGA. But the etf apears to be less risky and, when comparing its historical volatility, iShares MSCI EAFE is 3.81 times less risky than SPDR SSGA. The etf trades about -0.21 of its potential returns per unit of risk. The SPDR SSGA Small is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 12,676 in SPDR SSGA Small on August 29, 2024 and sell it today you would earn a total of 1,288 from holding SPDR SSGA Small or generate 10.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares MSCI EAFE vs. SPDR SSGA Small
Performance |
| Timeline |
| iShares MSCI EAFE |
| SPDR SSGA Small |
IShares MSCI and SPDR SSGA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares MSCI and SPDR SSGA
The main advantage of trading using opposite IShares MSCI and SPDR SSGA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI position performs unexpectedly, SPDR SSGA 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 SSGA will offset losses from the drop in SPDR SSGA's long position.| IShares MSCI vs. Dimensional Core Equity | IShares MSCI vs. Dimensional Emerging Core | IShares MSCI vs. Dimensional Targeted Value | IShares MSCI vs. Dimensional Small Cap |
| SPDR SSGA vs. SPDR SSGA Large | SPDR SSGA vs. Invesco SP SmallCap | SPDR SSGA vs. Invesco SP MidCap | SPDR SSGA vs. SPDR MSCI EAFE |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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