Correlation Between IShares Core and SPDR STOXX
Can any of the company-specific risk be diversified away by investing in both IShares Core and SPDR STOXX 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 Core and SPDR STOXX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Core MSCI and SPDR STOXX Europe, you can compare the effects of market volatilities on IShares Core and SPDR STOXX 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 Core with a short position of SPDR STOXX. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and SPDR STOXX.
Diversification Opportunities for IShares Core and SPDR STOXX
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between IShares and SPDR is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core MSCI and SPDR STOXX Europe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR STOXX Europe and IShares Core 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 Core MSCI are associated (or correlated) with SPDR STOXX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR STOXX Europe has no effect on the direction of IShares Core i.e., IShares Core and SPDR STOXX go up and down completely randomly.
Pair Corralation between IShares Core and SPDR STOXX
Given the investment horizon of 90 days iShares Core MSCI is expected to generate 1.01 times more return on investment than SPDR STOXX. However, IShares Core is 1.01 times more volatile than SPDR STOXX Europe. It trades about 0.05 of its potential returns per unit of risk. SPDR STOXX Europe is currently generating about 0.04 per unit of risk. If you would invest 4,545 in iShares Core MSCI on August 28, 2024 and sell it today you would earn a total of 1,012 from holding iShares Core MSCI or generate 22.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Core MSCI vs. SPDR STOXX Europe
Performance |
| Timeline |
| iShares Core MSCI |
| SPDR STOXX Europe |
IShares Core and SPDR STOXX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Core and SPDR STOXX
The main advantage of trading using opposite IShares Core and SPDR STOXX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Core position performs unexpectedly, SPDR STOXX 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 STOXX will offset losses from the drop in SPDR STOXX's long position.| IShares Core vs. WisdomTree International Hedged | IShares Core vs. WisdomTree Emerging Markets | IShares Core vs. WisdomTree Dynamic Currency |
| SPDR STOXX vs. SPDR Bloomberg Barclays | SPDR STOXX vs. SPDR Kensho Future | SPDR STOXX vs. SPDR Kensho Intelligent | SPDR STOXX vs. SPDR SP Kensho |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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