Correlation Between IShares MSCI and SPDR SP
Can any of the company-specific risk be diversified away by investing in both IShares MSCI 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 MSCI 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 MSCI EAFE and SPDR SP International, you can compare the effects of market volatilities on IShares MSCI 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 MSCI with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and SPDR SP.
Diversification Opportunities for IShares MSCI and SPDR SP
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and SPDR is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI EAFE 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 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 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 MSCI i.e., IShares MSCI and SPDR SP go up and down completely randomly.
Pair Corralation between IShares MSCI and SPDR SP
Considering the 90-day investment horizon iShares MSCI EAFE is expected to under-perform the SPDR SP. In addition to that, IShares MSCI is 1.29 times more volatile than SPDR SP International. It trades about -0.13 of its total potential returns per unit of risk. SPDR SP International is currently generating about -0.12 per unit of volatility. If you would invest 3,695 in SPDR SP International on August 24, 2024 and sell it today you would lose (68.00) from holding SPDR SP International or give up 1.84% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares MSCI EAFE vs. SPDR SP International
Performance |
| Timeline |
| iShares MSCI EAFE |
| SPDR SP International |
IShares MSCI and SPDR SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares MSCI and SPDR SP
The main advantage of trading using opposite IShares MSCI and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI 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 MSCI vs. iShares MSCI EAFE | IShares MSCI vs. iShares MSCI EAFE | IShares MSCI vs. WisdomTree International SmallCap | IShares MSCI vs. iShares Russell Mid Cap |
| 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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