Correlation Between IShares Technology and SPDR SP
Can any of the company-specific risk be diversified away by investing in both IShares Technology 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 Technology 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 Technology ETF and SPDR SP Kensho, you can compare the effects of market volatilities on IShares Technology 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 Technology with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Technology and SPDR SP.
Diversification Opportunities for IShares Technology 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 Technology ETF and SPDR SP Kensho in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Kensho and IShares Technology 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 Technology 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 Kensho has no effect on the direction of IShares Technology i.e., IShares Technology and SPDR SP go up and down completely randomly.
Pair Corralation between IShares Technology and SPDR SP
Considering the 90-day investment horizon IShares Technology is expected to generate 2.34 times less return on investment than SPDR SP. But when comparing it to its historical volatility, iShares Technology ETF is 1.14 times less risky than SPDR SP. It trades about 0.12 of its potential returns per unit of risk. SPDR SP Kensho is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 6,225 in SPDR SP Kensho on August 24, 2024 and sell it today you would earn a total of 515.00 from holding SPDR SP Kensho or generate 8.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Technology ETF vs. SPDR SP Kensho
Performance |
| Timeline |
| iShares Technology ETF |
| SPDR SP Kensho |
IShares Technology and SPDR SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Technology and SPDR SP
The main advantage of trading using opposite IShares Technology and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Technology 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 Technology vs. iShares Healthcare ETF | IShares Technology vs. iShares Financials ETF | IShares Technology vs. iShares Telecommunications ETF | IShares Technology vs. iShares Industrials ETF |
| SPDR SP vs. SPDR SP Health | SPDR SP vs. SPDR SP Health | SPDR SP vs. Aquagold International | SPDR SP vs. Morningstar Unconstrained Allocation |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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