Correlation Between SPDR Dow and SPDR MSCI
Can any of the company-specific risk be diversified away by investing in both SPDR Dow 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 SPDR Dow and SPDR MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR Dow Jones and SPDR MSCI Europe, you can compare the effects of market volatilities on SPDR Dow 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 SPDR Dow with a short position of SPDR MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Dow and SPDR MSCI.
Diversification Opportunities for SPDR Dow and SPDR MSCI
Poor diversification
The 3 months correlation between SPDR and SPDR is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Dow Jones and SPDR MSCI Europe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR MSCI Europe and SPDR Dow 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 Dow Jones 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 Europe has no effect on the direction of SPDR Dow i.e., SPDR Dow and SPDR MSCI go up and down completely randomly.
Pair Corralation between SPDR Dow and SPDR MSCI
Assuming the 90 days trading horizon SPDR Dow Jones is expected to generate 1.11 times more return on investment than SPDR MSCI. However, SPDR Dow is 1.11 times more volatile than SPDR MSCI Europe. It trades about -0.01 of its potential returns per unit of risk. SPDR MSCI Europe is currently generating about -0.13 per unit of risk. If you would invest 3,555 in SPDR Dow Jones on August 28, 2024 and sell it today you would lose (10.00) from holding SPDR Dow Jones or give up 0.28% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR Dow Jones vs. SPDR MSCI Europe
Performance |
| Timeline |
| SPDR Dow Jones |
| SPDR MSCI Europe |
SPDR Dow and SPDR MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR Dow and SPDR MSCI
The main advantage of trading using opposite SPDR Dow and SPDR MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR Dow 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.| SPDR Dow vs. Vanguard FTSE Developed | SPDR Dow vs. Leverage Shares 2x | SPDR Dow vs. Amundi Index Solutions | SPDR Dow vs. Amundi Index Solutions |
| SPDR MSCI vs. SPDR Dow Jones | SPDR MSCI vs. SPDR SP Dividend | SPDR MSCI vs. SPDR Barclays Euro | SPDR MSCI vs. SPDR SP Consumer |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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