Correlation Between SPDR SP and SPDR MSCI
Can any of the company-specific risk be diversified away by investing in both SPDR SP 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 SP 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 SP China and SPDR MSCI ACWI, you can compare the effects of market volatilities on SPDR SP 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 SP with a short position of SPDR MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and SPDR MSCI.
Diversification Opportunities for SPDR SP and SPDR MSCI
Very weak diversification
The 3 months correlation between SPDR and SPDR is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP China and SPDR MSCI ACWI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR MSCI ACWI 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 China 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 ACWI has no effect on the direction of SPDR SP i.e., SPDR SP and SPDR MSCI go up and down completely randomly.
Pair Corralation between SPDR SP and SPDR MSCI
Considering the 90-day investment horizon SPDR SP China is expected to under-perform the SPDR MSCI. In addition to that, SPDR SP is 2.35 times more volatile than SPDR MSCI ACWI. It trades about -0.07 of its total potential returns per unit of risk. SPDR MSCI ACWI is currently generating about -0.11 per unit of volatility. If you would invest 2,944 in SPDR MSCI ACWI on August 24, 2024 and sell it today you would lose (63.00) from holding SPDR MSCI ACWI or give up 2.14% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR SP China vs. SPDR MSCI ACWI
Performance |
| Timeline |
| SPDR SP China |
| SPDR MSCI ACWI |
SPDR SP and SPDR MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR SP and SPDR MSCI
The main advantage of trading using opposite SPDR SP and SPDR MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP 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 SP vs. Invesco Golden Dragon | SPDR SP vs. iShares MSCI Hong | SPDR SP vs. iShares MSCI China | SPDR SP vs. iShares China Large Cap |
| SPDR MSCI vs. SPDR SP International | SPDR MSCI vs. SPDR SP Emerging | SPDR MSCI vs. SPDR Global Dow | SPDR MSCI vs. SPDR SP Global |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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