Correlation Between IShares SP and SPDR SPASX
Can any of the company-specific risk be diversified away by investing in both IShares SP and SPDR SPASX 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 SP and SPDR SPASX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares SP 500 and SPDR SPASX 200, you can compare the effects of market volatilities on IShares SP and SPDR SPASX 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 SP with a short position of SPDR SPASX. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares SP and SPDR SPASX.
Diversification Opportunities for IShares SP and SPDR SPASX
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between IShares and SPDR is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding iShares SP 500 and SPDR SPASX 200 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SPASX 200 and IShares 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 iShares SP 500 are associated (or correlated) with SPDR SPASX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SPASX 200 has no effect on the direction of IShares SP i.e., IShares SP and SPDR SPASX go up and down completely randomly.
Pair Corralation between IShares SP and SPDR SPASX
Assuming the 90 days trading horizon IShares SP is expected to generate 1.45 times less return on investment than SPDR SPASX. But when comparing it to its historical volatility, iShares SP 500 is 1.38 times less risky than SPDR SPASX. It trades about 0.17 of its potential returns per unit of risk. SPDR SPASX 200 is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 1,361 in SPDR SPASX 200 on August 29, 2024 and sell it today you would earn a total of 61.00 from holding SPDR SPASX 200 or generate 4.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares SP 500 vs. SPDR SPASX 200
Performance |
| Timeline |
| iShares SP 500 |
| SPDR SPASX 200 |
IShares SP and SPDR SPASX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares SP and SPDR SPASX
The main advantage of trading using opposite IShares SP and SPDR SPASX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares SP position performs unexpectedly, SPDR SPASX 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 SPASX will offset losses from the drop in SPDR SPASX's long position.| IShares SP vs. Betashares Asia Technology | IShares SP vs. CD Private Equity | IShares SP vs. BetaShares Australia 200 | IShares SP vs. Australian High Interest |
| SPDR SPASX vs. SPDR SP 500 | SPDR SPASX vs. iShares Core SP | SPDR SPASX vs. Vanguard Total Market | SPDR SPASX vs. iShares Core SP |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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