Correlation Between IShares II and SPDR Dow
Can any of the company-specific risk be diversified away by investing in both IShares II and SPDR Dow 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 II and SPDR Dow into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares II Public and SPDR Dow Jones, you can compare the effects of market volatilities on IShares II and SPDR Dow 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 II with a short position of SPDR Dow. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares II and SPDR Dow.
Diversification Opportunities for IShares II and SPDR Dow
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between IShares and SPDR is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding iShares II Public and SPDR Dow Jones in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Dow Jones and IShares II 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 II Public are associated (or correlated) with SPDR Dow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Dow Jones has no effect on the direction of IShares II i.e., IShares II and SPDR Dow go up and down completely randomly.
Pair Corralation between IShares II and SPDR Dow
Assuming the 90 days trading horizon iShares II Public is expected to under-perform the SPDR Dow. In addition to that, IShares II is 1.17 times more volatile than SPDR Dow Jones. It trades about -0.04 of its total potential returns per unit of risk. SPDR Dow Jones is currently generating about 0.18 per unit of volatility. If you would invest 35,199 in SPDR Dow Jones on August 29, 2024 and sell it today you would earn a total of 7,401 from holding SPDR Dow Jones or generate 21.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares II Public vs. SPDR Dow Jones
Performance |
| Timeline |
| iShares II Public |
| SPDR Dow Jones |
IShares II and SPDR Dow Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares II and SPDR Dow
The main advantage of trading using opposite IShares II and SPDR Dow positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares II position performs unexpectedly, SPDR Dow 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 Dow will offset losses from the drop in SPDR Dow's long position.| IShares II vs. SPDR Dow Jones | IShares II vs. iShares SP 500 | IShares II vs. iShares Core MSCI | IShares II vs. iShares MSCI EM |
| SPDR Dow vs. SPDR MSCI World | SPDR Dow vs. SPDR SP Dividend | SPDR Dow vs. SPDR SP 500 | SPDR Dow vs. SPDR BB SB |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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