Correlation Between IShares SPASX and SPDR SP
Can any of the company-specific risk be diversified away by investing in both IShares SPASX 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 SPASX 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 SPASX Small and SPDR SP 500, you can compare the effects of market volatilities on IShares SPASX 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 SPASX with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares SPASX and SPDR SP.
Diversification Opportunities for IShares SPASX and SPDR SP
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IShares and SPDR is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding iShares SPASX Small and SPDR SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP 500 and IShares SPASX 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 SPASX Small 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 500 has no effect on the direction of IShares SPASX i.e., IShares SPASX and SPDR SP go up and down completely randomly.
Pair Corralation between IShares SPASX and SPDR SP
Assuming the 90 days trading horizon IShares SPASX is expected to generate 2.3 times less return on investment than SPDR SP. In addition to that, IShares SPASX is 1.15 times more volatile than SPDR SP 500. It trades about 0.06 of its total potential returns per unit of risk. SPDR SP 500 is currently generating about 0.15 per unit of volatility. If you would invest 79,084 in SPDR SP 500 on September 1, 2024 and sell it today you would earn a total of 13,128 from holding SPDR SP 500 or generate 16.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares SPASX Small vs. SPDR SP 500
Performance |
| Timeline |
| iShares SPASX Small |
| SPDR SP 500 |
IShares SPASX and SPDR SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares SPASX and SPDR SP
The main advantage of trading using opposite IShares SPASX and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares SPASX 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 SPASX vs. iShares MSCI Emerging | IShares SPASX vs. iShares Global Aggregate | IShares SPASX vs. iShares CoreSP MidCap | IShares SPASX vs. iShares SP 500 |
| SPDR SP vs. ETFS Morningstar Global | SPDR SP vs. BetaShares Geared Equity | SPDR SP vs. VanEck Vectors Australian | SPDR SP vs. SPDR SPASX 200 |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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