Correlation Between SPDR EURO and IShares Europe
Can any of the company-specific risk be diversified away by investing in both SPDR EURO and IShares Europe 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 EURO and IShares Europe into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR EURO STOXX and iShares Europe ETF, you can compare the effects of market volatilities on SPDR EURO and IShares Europe 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 EURO with a short position of IShares Europe. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR EURO and IShares Europe.
Diversification Opportunities for SPDR EURO and IShares Europe
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between SPDR and IShares is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding SPDR EURO STOXX and iShares Europe ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Europe ETF and SPDR EURO 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 EURO STOXX are associated (or correlated) with IShares Europe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Europe ETF has no effect on the direction of SPDR EURO i.e., SPDR EURO and IShares Europe go up and down completely randomly.
Pair Corralation between SPDR EURO and IShares Europe
Considering the 90-day investment horizon SPDR EURO STOXX is expected to under-perform the IShares Europe. In addition to that, SPDR EURO is 1.14 times more volatile than iShares Europe ETF. It trades about -0.3 of its total potential returns per unit of risk. iShares Europe ETF is currently generating about -0.29 per unit of volatility. If you would invest 5,640 in iShares Europe ETF on August 28, 2024 and sell it today you would lose (314.00) from holding iShares Europe ETF or give up 5.57% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR EURO STOXX vs. iShares Europe ETF
Performance |
| Timeline |
| SPDR EURO STOXX |
| iShares Europe ETF |
SPDR EURO and IShares Europe Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR EURO and IShares Europe
The main advantage of trading using opposite SPDR EURO and IShares Europe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR EURO position performs unexpectedly, IShares Europe 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 IShares Europe will offset losses from the drop in IShares Europe's long position.| SPDR EURO vs. iShares MSCI Eurozone | SPDR EURO vs. iShares MSCI Germany | SPDR EURO vs. iShares MSCI United | SPDR EURO vs. iShares Europe ETF |
| IShares Europe vs. WisdomTree International Hedged | IShares Europe vs. WisdomTree Emerging Markets | IShares Europe vs. WisdomTree Dynamic Currency |
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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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