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 600, 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
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 SP Small Cap and SPDR SP 600 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP 600 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 600 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 0.99 times more return on investment than SPDR SP. However, iShares SP Small Cap is 1.01 times less risky than SPDR SP. It trades about 0.09 of its potential returns per unit of risk. SPDR SP 600 is currently generating about 0.09 per unit of risk. If you would invest 9,815 in iShares SP Small Cap on August 24, 2024 and sell it today you would earn a total of 1,557 from holding iShares SP Small Cap or generate 15.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.21% |
| Values | Daily Returns |
iShares SP Small Cap vs. SPDR SP 600
Performance |
| Timeline |
| iShares SP Small |
| SPDR SP 600 |
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. Vanguard Small Cap Value | IShares SP vs. iShares Russell 2000 | IShares SP vs. Dimensional Targeted Value | IShares SP vs. SPDR SP 600 |
| SPDR SP vs. Dimensional ETF Trust | SPDR SP vs. Vanguard Small Cap Index | SPDR SP vs. First Trust Multi Manager | SPDR SP vs. Vanguard SP Small Cap |
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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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