Correlation Between SPDR MSCI and SPDR SP
Can any of the company-specific risk be diversified away by investing in both SPDR 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 SPDR 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 SPDR MSCI EM and SPDR SP Financials, you can compare the effects of market volatilities on SPDR 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 SPDR MSCI with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR MSCI and SPDR SP.
Diversification Opportunities for SPDR MSCI and SPDR SP
Modest diversification
The 3 months correlation between SPDR and SPDR is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding SPDR MSCI EM and SPDR SP Financials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Financials and SPDR 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 SPDR MSCI EM 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 Financials has no effect on the direction of SPDR MSCI i.e., SPDR MSCI and SPDR SP go up and down completely randomly.
Pair Corralation between SPDR MSCI and SPDR SP
Assuming the 90 days trading horizon SPDR MSCI is expected to generate 3.51 times less return on investment than SPDR SP. But when comparing it to its historical volatility, SPDR MSCI EM is 1.0 times less risky than SPDR SP. It trades about 0.02 of its potential returns per unit of risk. SPDR SP Financials is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 3,971 in SPDR SP Financials on September 3, 2024 and sell it today you would earn a total of 2,010 from holding SPDR SP Financials or generate 50.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR MSCI EM vs. SPDR SP Financials
Performance |
| Timeline |
| SPDR MSCI EM |
| SPDR SP Financials |
SPDR MSCI and SPDR SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR MSCI and SPDR SP
The main advantage of trading using opposite SPDR MSCI and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR 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.| SPDR MSCI vs. UBSFund Solutions MSCI | SPDR MSCI vs. Vanguard SP 500 | SPDR MSCI vs. iShares VII PLC | SPDR MSCI vs. iShares Core SP |
| SPDR SP vs. SPDR MSCI Europe | SPDR SP vs. SPDR SP Utilities | SPDR SP vs. SPDR MSCI Europe | SPDR SP vs. SPDR 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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