Correlation Between IShares II and SPDR MSCI
Can any of the company-specific risk be diversified away by investing in both IShares II and SPDR MSCI 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 MSCI 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 MSCI World, you can compare the effects of market volatilities on IShares II and SPDR MSCI 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 MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares II and SPDR MSCI.
Diversification Opportunities for IShares II and SPDR MSCI
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IShares and SPDR is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding iShares II Public and SPDR MSCI World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR MSCI World 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 MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR MSCI World has no effect on the direction of IShares II i.e., IShares II and SPDR MSCI go up and down completely randomly.
Pair Corralation between IShares II and SPDR MSCI
Assuming the 90 days trading horizon iShares II Public is expected to under-perform the SPDR MSCI. But the etf apears to be less risky and, when comparing its historical volatility, iShares II Public is 1.11 times less risky than SPDR MSCI. The etf trades about -0.2 of its potential returns per unit of risk. The SPDR MSCI World is currently generating about -0.16 of returns per unit of risk over similar time horizon. If you would invest 6,663 in SPDR MSCI World on January 14, 2025 and sell it today you would lose (593.00) from holding SPDR MSCI World or give up 8.9% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares II Public vs. SPDR MSCI World
Performance |
| Timeline |
| iShares II Public |
| SPDR MSCI World |
IShares II and SPDR MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares II and SPDR MSCI
The main advantage of trading using opposite IShares II and SPDR MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares II position performs unexpectedly, SPDR MSCI 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 MSCI will offset losses from the drop in SPDR MSCI's long position.| IShares II vs. Vanguard SP 500 | IShares II vs. SPDR Dow Jones | IShares II vs. iShares Core MSCI | IShares II vs. iShares SP 500 |
| SPDR MSCI vs. SPDR MSCI World | SPDR MSCI vs. SPDR SP Dividend | SPDR MSCI vs. SPDR SP 500 | SPDR MSCI 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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