Correlation Between SPDR SP and IShares Currency
Can any of the company-specific risk be diversified away by investing in both SPDR SP and IShares Currency 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 SP and IShares Currency into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR SP International and iShares Currency Hedged, you can compare the effects of market volatilities on SPDR SP and IShares Currency 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 SP with a short position of IShares Currency. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and IShares Currency.
Diversification Opportunities for SPDR SP and IShares Currency
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between SPDR and IShares is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP International and iShares Currency Hedged in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Currency Hedged and SPDR SP 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 SP International are associated (or correlated) with IShares Currency. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Currency Hedged has no effect on the direction of SPDR SP i.e., SPDR SP and IShares Currency go up and down completely randomly.
Pair Corralation between SPDR SP and IShares Currency
Considering the 90-day investment horizon SPDR SP is expected to generate 5.72 times less return on investment than IShares Currency. In addition to that, SPDR SP is 1.47 times more volatile than iShares Currency Hedged. It trades about 0.02 of its total potential returns per unit of risk. iShares Currency Hedged is currently generating about 0.17 per unit of volatility. If you would invest 3,199 in iShares Currency Hedged on September 5, 2024 and sell it today you would earn a total of 66.00 from holding iShares Currency Hedged or generate 2.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
SPDR SP International vs. iShares Currency Hedged
Performance |
| Timeline |
| SPDR SP International |
| iShares Currency Hedged |
SPDR SP and IShares Currency Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR SP and IShares Currency
The main advantage of trading using opposite SPDR SP and IShares Currency positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP position performs unexpectedly, IShares Currency 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 Currency will offset losses from the drop in IShares Currency's long position.| SPDR SP vs. FT Vest Equity | SPDR SP vs. Northern Lights | SPDR SP vs. Dimensional International High | SPDR SP vs. JPMorgan Fundamental Data |
| IShares Currency vs. iShares Currency Hedged | IShares Currency vs. iShares MSCI Intl | IShares Currency vs. iShares Currency Hedged |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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