Correlation Between IShares Consumer and SPDR SP
Can any of the company-specific risk be diversified away by investing in both IShares Consumer 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 Consumer 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 Consumer Discretionary and SPDR SP Retail, you can compare the effects of market volatilities on IShares Consumer 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 Consumer with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Consumer and SPDR SP.
Diversification Opportunities for IShares Consumer and SPDR SP
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IShares and SPDR is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding iShares Consumer Discretionary and SPDR SP Retail in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Retail and IShares Consumer 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 Consumer Discretionary 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 Retail has no effect on the direction of IShares Consumer i.e., IShares Consumer and SPDR SP go up and down completely randomly.
Pair Corralation between IShares Consumer and SPDR SP
Considering the 90-day investment horizon IShares Consumer is expected to generate 1.06 times less return on investment than SPDR SP. But when comparing it to its historical volatility, iShares Consumer Discretionary is 1.4 times less risky than SPDR SP. It trades about 0.45 of its potential returns per unit of risk. SPDR SP Retail is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest 7,644 in SPDR SP Retail on August 28, 2024 and sell it today you would earn a total of 757.00 from holding SPDR SP Retail or generate 9.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Consumer Discretionary vs. SPDR SP Retail
Performance |
| Timeline |
| iShares Consumer Dis |
| SPDR SP Retail |
IShares Consumer and SPDR SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Consumer and SPDR SP
The main advantage of trading using opposite IShares Consumer and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Consumer 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 Consumer vs. iShares Consumer Staples | IShares Consumer vs. iShares Industrials ETF | IShares Consumer vs. iShares Basic Materials | IShares Consumer vs. iShares Utilities ETF |
| SPDR SP vs. SPDR SP Homebuilders | SPDR SP vs. Consumer Discretionary Select | SPDR SP vs. SPDR SP Metals | SPDR SP vs. Industrial Select Sector |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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