Correlation Between IShares Industrials and SPDR SP
Can any of the company-specific risk be diversified away by investing in both IShares Industrials 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 Industrials 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 Industrials ETF and SPDR SP Transportation, you can compare the effects of market volatilities on IShares Industrials 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 Industrials with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Industrials and SPDR SP.
Diversification Opportunities for IShares Industrials and SPDR SP
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and SPDR is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding iShares Industrials ETF and SPDR SP Transportation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Transportation and IShares Industrials 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 Industrials ETF 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 Transportation has no effect on the direction of IShares Industrials i.e., IShares Industrials and SPDR SP go up and down completely randomly.
Pair Corralation between IShares Industrials and SPDR SP
Considering the 90-day investment horizon IShares Industrials is expected to generate 1.7 times less return on investment than SPDR SP. But when comparing it to its historical volatility, iShares Industrials ETF is 1.59 times less risky than SPDR SP. It trades about 0.26 of its potential returns per unit of risk. SPDR SP Transportation is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 8,437 in SPDR SP Transportation on August 30, 2024 and sell it today you would earn a total of 978.00 from holding SPDR SP Transportation or generate 11.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Industrials ETF vs. SPDR SP Transportation
Performance |
| Timeline |
| iShares Industrials ETF |
| SPDR SP Transportation |
IShares Industrials and SPDR SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Industrials and SPDR SP
The main advantage of trading using opposite IShares Industrials and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Industrials 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 Industrials vs. iShares Consumer Discretionary | IShares Industrials vs. iShares Consumer Staples | IShares Industrials vs. iShares Basic Materials | IShares Industrials vs. iShares Utilities ETF |
| SPDR SP vs. First Trust Exchange Traded | SPDR SP vs. Ultimus Managers Trust | SPDR SP vs. Horizon Kinetics Medical | SPDR SP vs. Harbor Health Care |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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