Correlation Between IShares and SPDR EURO
Can any of the company-specific risk be diversified away by investing in both IShares and SPDR EURO 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 and SPDR EURO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IShares and SPDR EURO STOXX, you can compare the effects of market volatilities on IShares and SPDR EURO 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 with a short position of SPDR EURO. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares and SPDR EURO.
Diversification Opportunities for IShares and SPDR EURO
Very weak diversification
The 3 months correlation between IShares and SPDR is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding IShares and SPDR EURO STOXX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR EURO STOXX and IShares 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 are associated (or correlated) with SPDR EURO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR EURO STOXX has no effect on the direction of IShares i.e., IShares and SPDR EURO go up and down completely randomly.
Pair Corralation between IShares and SPDR EURO
Given the investment horizon of 90 days IShares is expected to under-perform the SPDR EURO. But the etf apears to be less risky and, when comparing its historical volatility, IShares is 1.27 times less risky than SPDR EURO. The etf trades about -0.12 of its potential returns per unit of risk. The SPDR EURO STOXX is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest 5,204 in SPDR EURO STOXX on August 25, 2024 and sell it today you would lose (434.00) from holding SPDR EURO STOXX or give up 8.34% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 42.52% |
| Values | Daily Returns |
IShares vs. SPDR EURO STOXX
Performance |
| Timeline |
| IShares |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| SPDR EURO STOXX |
IShares and SPDR EURO Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares and SPDR EURO
The main advantage of trading using opposite IShares and SPDR EURO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares position performs unexpectedly, SPDR EURO 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 EURO will offset losses from the drop in SPDR EURO's long position.| IShares vs. iShares MSCI Hong | IShares vs. HUMANA INC | IShares vs. SCOR PK | IShares vs. Aquagold International |
| SPDR EURO vs. WisdomTree Europe Hedged | SPDR EURO vs. WisdomTree International Hedged | SPDR EURO vs. WisdomTree Emerging Markets | SPDR EURO 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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