Correlation Between IShares SP and IShares Developed
Can any of the company-specific risk be diversified away by investing in both IShares SP and IShares Developed 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 Developed 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 Developed Markets, you can compare the effects of market volatilities on IShares SP and IShares Developed 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 Developed. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares SP and IShares Developed.
Diversification Opportunities for IShares SP and IShares Developed
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between IShares and IShares is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding iShares SP 500 and iShares Developed Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Developed Markets 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 Developed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Developed Markets has no effect on the direction of IShares SP i.e., IShares SP and IShares Developed go up and down completely randomly.
Pair Corralation between IShares SP and IShares Developed
Assuming the 90 days trading horizon iShares SP 500 is expected to generate 0.89 times more return on investment than IShares Developed. However, iShares SP 500 is 1.12 times less risky than IShares Developed. It trades about 0.16 of its potential returns per unit of risk. iShares Developed Markets is currently generating about 0.08 per unit of risk. If you would invest 3,935 in iShares SP 500 on September 12, 2024 and sell it today you would earn a total of 1,815 from holding iShares SP 500 or generate 46.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares SP 500 vs. iShares Developed Markets
Performance |
| Timeline |
| iShares SP 500 |
| iShares Developed Markets |
IShares SP and IShares Developed Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares SP and IShares Developed
The main advantage of trading using opposite IShares SP and IShares Developed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares SP position performs unexpectedly, IShares Developed 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 Developed will offset losses from the drop in IShares Developed's long position.| IShares SP vs. SPDR Dow Jones | IShares SP vs. iShares Core MSCI | IShares SP vs. Vanguard FTSE All World | IShares SP vs. iShares Core MSCI |
| IShares Developed vs. SPDR Dow Jones | IShares Developed vs. iShares Core MSCI | IShares Developed vs. iShares SP 500 | IShares Developed vs. Vanguard FTSE All World |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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