Correlation Between IShares Europe and SPDR STOXX
Can any of the company-specific risk be diversified away by investing in both IShares Europe 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 Europe 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 Europe ETF and SPDR STOXX Europe, you can compare the effects of market volatilities on IShares Europe 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 Europe with a short position of SPDR STOXX. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Europe and SPDR STOXX.
Diversification Opportunities for IShares Europe and SPDR STOXX
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IShares and SPDR is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding iShares Europe ETF 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 Europe 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 Europe ETF 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 Europe i.e., IShares Europe and SPDR STOXX go up and down completely randomly.
Pair Corralation between IShares Europe and SPDR STOXX
Considering the 90-day investment horizon iShares Europe ETF is expected to generate 1.0 times more return on investment than SPDR STOXX. However, iShares Europe ETF is 1.0 times less risky than SPDR STOXX. It trades about 0.03 of its potential returns per unit of risk. SPDR STOXX Europe is currently generating about 0.01 per unit of risk. If you would invest 5,124 in iShares Europe ETF on August 28, 2024 and sell it today you would earn a total of 202.00 from holding iShares Europe ETF or generate 3.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Europe ETF vs. SPDR STOXX Europe
Performance |
| Timeline |
| iShares Europe ETF |
| SPDR STOXX Europe |
IShares Europe and SPDR STOXX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Europe and SPDR STOXX
The main advantage of trading using opposite IShares Europe and SPDR STOXX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Europe 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 Europe vs. WisdomTree International Hedged | IShares Europe vs. WisdomTree Emerging Markets | IShares Europe 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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