Correlation Between IShares SP and IShares STOXX
Can any of the company-specific risk be diversified away by investing in both IShares SP and IShares STOXX 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 IShares STOXX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares SP 500 and iShares STOXX Europe, you can compare the effects of market volatilities on IShares SP and IShares STOXX 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 IShares STOXX. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares SP and IShares STOXX.
Diversification Opportunities for IShares SP and IShares STOXX
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IShares and IShares is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding iShares SP 500 and iShares STOXX Europe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares STOXX Europe 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 500 are associated (or correlated) with IShares STOXX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares STOXX Europe has no effect on the direction of IShares SP i.e., IShares SP and IShares STOXX go up and down completely randomly.
Pair Corralation between IShares SP and IShares STOXX
Assuming the 90 days trading horizon iShares SP 500 is expected to generate 1.02 times more return on investment than IShares STOXX. However, IShares SP is 1.02 times more volatile than iShares STOXX Europe. It trades about -0.14 of its potential returns per unit of risk. iShares STOXX Europe is currently generating about -0.17 per unit of risk. If you would invest 700.00 in iShares SP 500 on August 28, 2024 and sell it today you would lose (19.00) from holding iShares SP 500 or give up 2.71% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares SP 500 vs. iShares STOXX Europe
Performance |
| Timeline |
| iShares SP 500 |
| iShares STOXX Europe |
IShares SP and IShares STOXX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares SP and IShares STOXX
The main advantage of trading using opposite IShares SP and IShares STOXX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares SP position performs unexpectedly, IShares STOXX 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 IShares STOXX will offset losses from the drop in IShares STOXX's long position.| IShares SP vs. SPDR Dow Jones | IShares SP vs. iShares SP 500 | IShares SP vs. iShares China CNY | IShares SP vs. iShares Core MSCI |
| IShares STOXX vs. SPDR Dow Jones | IShares STOXX vs. iShares SP 500 | IShares STOXX vs. iShares China CNY | IShares STOXX vs. iShares Core MSCI |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
Other Complementary Tools
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
| Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance |