Correlation Between IShares Core and SPDR SSGA
Can any of the company-specific risk be diversified away by investing in both IShares Core and SPDR SSGA 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 Core and SPDR SSGA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Core SP and SPDR SSGA Small, you can compare the effects of market volatilities on IShares Core and SPDR SSGA 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 Core with a short position of SPDR SSGA. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and SPDR SSGA.
Diversification Opportunities for IShares Core and SPDR SSGA
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IShares and SPDR is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SP and SPDR SSGA Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SSGA Small and IShares Core 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 Core SP are associated (or correlated) with SPDR SSGA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SSGA Small has no effect on the direction of IShares Core i.e., IShares Core and SPDR SSGA go up and down completely randomly.
Pair Corralation between IShares Core and SPDR SSGA
Considering the 90-day investment horizon IShares Core is expected to generate 3.85 times less return on investment than SPDR SSGA. But when comparing it to its historical volatility, iShares Core SP is 2.74 times less risky than SPDR SSGA. It trades about 0.15 of its potential returns per unit of risk. SPDR SSGA Small is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 12,529 in SPDR SSGA Small on August 25, 2024 and sell it today you would earn a total of 1,377 from holding SPDR SSGA Small or generate 10.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Core SP vs. SPDR SSGA Small
Performance |
| Timeline |
| iShares Core SP |
| SPDR SSGA Small |
IShares Core and SPDR SSGA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Core and SPDR SSGA
The main advantage of trading using opposite IShares Core and SPDR SSGA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Core position performs unexpectedly, SPDR SSGA 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 SSGA will offset losses from the drop in SPDR SSGA's long position.| IShares Core vs. iShares Core SP | IShares Core vs. iShares Core SP | IShares Core vs. iShares SP 500 | IShares Core vs. iShares Russell 2000 |
| SPDR SSGA vs. SPDR SSGA Large | SPDR SSGA vs. Invesco SP SmallCap | SPDR SSGA vs. Invesco SP MidCap | SPDR SSGA vs. SPDR MSCI EAFE |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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