Correlation Between IShares Regional and SPDR SP
Can any of the company-specific risk be diversified away by investing in both IShares Regional and SPDR SP 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 Regional and SPDR SP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Regional Banks and SPDR SP Capital, you can compare the effects of market volatilities on IShares Regional and SPDR SP 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 Regional with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Regional and SPDR SP.
Diversification Opportunities for IShares Regional and SPDR SP
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and SPDR is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding iShares Regional Banks and SPDR SP Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Capital and IShares Regional 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 Regional Banks are associated (or correlated) with SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP Capital has no effect on the direction of IShares Regional i.e., IShares Regional and SPDR SP go up and down completely randomly.
Pair Corralation between IShares Regional and SPDR SP
Considering the 90-day investment horizon iShares Regional Banks is expected to generate 1.39 times more return on investment than SPDR SP. However, IShares Regional is 1.39 times more volatile than SPDR SP Capital. It trades about 0.12 of its potential returns per unit of risk. SPDR SP Capital is currently generating about 0.16 per unit of risk. If you would invest 3,922 in iShares Regional Banks on August 25, 2024 and sell it today you would earn a total of 1,693 from holding iShares Regional Banks or generate 43.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Regional Banks vs. SPDR SP Capital
Performance |
| Timeline |
| iShares Regional Banks |
| SPDR SP Capital |
IShares Regional and SPDR SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Regional and SPDR SP
The main advantage of trading using opposite IShares Regional and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Regional position performs unexpectedly, SPDR SP 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 SP will offset losses from the drop in SPDR SP's long position.| IShares Regional vs. UBS AG London | IShares Regional vs. UBS AG London | IShares Regional vs. ETRACS Quarterly Pay | IShares Regional vs. ETRACS 2xMonthly Pay |
| SPDR SP vs. SPDR SP Insurance | SPDR SP vs. iShares Broker Dealers Securities | SPDR SP vs. SPDR SP Bank | SPDR SP vs. iShares Financial Services |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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