Correlation Between IShares SP and SPDR SP
Can any of the company-specific risk be diversified away by investing in both IShares SP 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 SP 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 SP Small Cap and SPDR SP 400, you can compare the effects of market volatilities on IShares SP 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 SP with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares SP and SPDR SP.
Diversification Opportunities for IShares SP and SPDR SP
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and SPDR is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding iShares SP Small Cap and SPDR SP 400 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP 400 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 Small Cap 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 400 has no effect on the direction of IShares SP i.e., IShares SP and SPDR SP go up and down completely randomly.
Pair Corralation between IShares SP and SPDR SP
Considering the 90-day investment horizon iShares SP Small Cap is expected to generate 1.16 times more return on investment than SPDR SP. However, IShares SP is 1.16 times more volatile than SPDR SP 400. It trades about 0.06 of its potential returns per unit of risk. SPDR SP 400 is currently generating about 0.01 per unit of risk. If you would invest 11,193 in iShares SP Small Cap on September 18, 2024 and sell it today you would earn a total of 111.00 from holding iShares SP Small Cap or generate 0.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares SP Small Cap vs. SPDR SP 400
Performance |
| Timeline |
| iShares SP Small |
| SPDR SP 400 |
IShares SP and SPDR SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares SP and SPDR SP
The main advantage of trading using opposite IShares SP and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares SP 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 SP vs. iShares SP Small Cap | IShares SP vs. iShares SP Mid Cap | IShares SP vs. iShares SP Mid Cap | IShares SP vs. iShares SP 500 |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
Other Complementary Tools
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| Global Correlations Find global opportunities by holding instruments from different markets | |
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
| Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios |