Correlation Between IShares SP and SPDR SP
Can any of the company-specific risk be diversified away by investing in both IShares SP 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 SP 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 SP 500 and SPDR SP 1500, you can compare the effects of market volatilities on IShares SP 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 SP with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares SP and SPDR SP.
Diversification Opportunities for IShares SP and SPDR SP
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between IShares and SPDR is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding iShares SP 500 and SPDR SP 1500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP 1500 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 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 1500 has no effect on the direction of IShares SP i.e., IShares SP and SPDR SP go up and down completely randomly.
Pair Corralation between IShares SP and SPDR SP
Considering the 90-day investment horizon iShares SP 500 is expected to generate 1.07 times more return on investment than SPDR SP. However, IShares SP is 1.07 times more volatile than SPDR SP 1500. It trades about 0.12 of its potential returns per unit of risk. SPDR SP 1500 is currently generating about 0.11 per unit of risk. If you would invest 5,770 in iShares SP 500 on August 28, 2024 and sell it today you would earn a total of 4,199 from holding iShares SP 500 or generate 72.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares SP 500 vs. SPDR SP 1500
Performance |
| Timeline |
| iShares SP 500 |
| SPDR SP 1500 |
IShares SP and SPDR SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares SP and SPDR SP
The main advantage of trading using opposite IShares SP and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares SP 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 SP vs. Invesco Dynamic Large | IShares SP vs. Perella Weinberg Partners | IShares SP vs. HUMANA INC | IShares SP vs. Aquagold International |
| SPDR SP vs. Freedom Day Dividend | SPDR SP vs. Davis Select International | SPDR SP vs. iShares MSCI China | SPDR SP vs. SmartETFs Dividend Builder |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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