Correlation Between IShares Aerospace and SPDR SP
Can any of the company-specific risk be diversified away by investing in both IShares Aerospace 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 Aerospace 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 Aerospace Defense and SPDR SP Aerospace, you can compare the effects of market volatilities on IShares Aerospace 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 Aerospace with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Aerospace and SPDR SP.
Diversification Opportunities for IShares Aerospace and SPDR SP
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IShares and SPDR is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding iShares Aerospace Defense and SPDR SP Aerospace in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Aerospace and IShares Aerospace 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 Aerospace Defense 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 Aerospace has no effect on the direction of IShares Aerospace i.e., IShares Aerospace and SPDR SP go up and down completely randomly.
Pair Corralation between IShares Aerospace and SPDR SP
Considering the 90-day investment horizon IShares Aerospace is expected to generate 4.23 times less return on investment than SPDR SP. But when comparing it to its historical volatility, iShares Aerospace Defense is 1.13 times less risky than SPDR SP. It trades about 0.05 of its potential returns per unit of risk. SPDR SP Aerospace is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 16,016 in SPDR SP Aerospace on August 24, 2024 and sell it today you would earn a total of 1,001 from holding SPDR SP Aerospace or generate 6.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Aerospace Defense vs. SPDR SP Aerospace
Performance |
| Timeline |
| iShares Aerospace Defense |
| SPDR SP Aerospace |
IShares Aerospace and SPDR SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Aerospace and SPDR SP
The main advantage of trading using opposite IShares Aerospace and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Aerospace 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 Aerospace vs. SPDR SP Aerospace | IShares Aerospace vs. Invesco Aerospace Defense | IShares Aerospace vs. iShares Medical Devices | IShares Aerospace vs. iShares Expanded Tech Software |
| SPDR SP vs. Invesco Aerospace Defense | SPDR SP vs. iShares Aerospace Defense | SPDR SP vs. SPDR SP Health | SPDR SP vs. SPDR SP Transportation |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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