Correlation Between IShares Global and SPDR SP
Can any of the company-specific risk be diversified away by investing in both IShares Global 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 Global 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 Global Energy and SPDR SP Oil, you can compare the effects of market volatilities on IShares Global 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 Global with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Global and SPDR SP.
Diversification Opportunities for IShares Global and SPDR SP
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and SPDR is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding iShares Global Energy and SPDR SP Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Oil and IShares Global 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 Global Energy 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 Oil has no effect on the direction of IShares Global i.e., IShares Global and SPDR SP go up and down completely randomly.
Pair Corralation between IShares Global and SPDR SP
Considering the 90-day investment horizon IShares Global is expected to generate 2.31 times less return on investment than SPDR SP. But when comparing it to its historical volatility, iShares Global Energy is 1.49 times less risky than SPDR SP. It trades about 0.11 of its potential returns per unit of risk. SPDR SP Oil is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 13,114 in SPDR SP Oil on August 28, 2024 and sell it today you would earn a total of 1,490 from holding SPDR SP Oil or generate 11.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Global Energy vs. SPDR SP Oil
Performance |
| Timeline |
| iShares Global Energy |
| SPDR SP Oil |
IShares Global and SPDR SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Global and SPDR SP
The main advantage of trading using opposite IShares Global and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Global 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 Global vs. iShares Energy ETF | IShares Global vs. iShares North American | IShares Global vs. iShares Global Financials | IShares Global vs. iShares Global Healthcare |
| SPDR SP vs. VanEck Oil Services | SPDR SP vs. SPDR SP Metals | SPDR SP vs. Energy Select Sector | SPDR SP vs. SPDR SP Retail |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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