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 Transportation, 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
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IShares and SPDR is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding iShares Aerospace Defense and SPDR SP Transportation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Transportation 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 Transportation 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 Defense is expected to generate 1.08 times more return on investment than SPDR SP. However, IShares Aerospace is 1.08 times more volatile than SPDR SP Transportation. It trades about 0.36 of its potential returns per unit of risk. SPDR SP Transportation is currently generating about 0.36 per unit of risk. If you would invest 14,651 in iShares Aerospace Defense on October 24, 2024 and sell it today you would earn a total of 999.00 from holding iShares Aerospace Defense or generate 6.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Aerospace Defense vs. SPDR SP Transportation
Performance |
| Timeline |
| iShares Aerospace Defense |
| SPDR SP Transportation |
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. First Trust Indxx | SPDR SP vs. Direxion Daily Industrials | SPDR SP vs. Themes Transatlantic Defense | SPDR SP vs. FlexShares STOXX Global |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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