Correlation Between IShares Morningstar and SPDR SP
Can any of the company-specific risk be diversified away by investing in both IShares Morningstar 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 Morningstar 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 Morningstar Small Cap and SPDR SP 600, you can compare the effects of market volatilities on IShares Morningstar 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 Morningstar with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Morningstar and SPDR SP.
Diversification Opportunities for IShares Morningstar and SPDR SP
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and SPDR is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding iShares Morningstar Small Cap and SPDR SP 600 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP 600 and IShares Morningstar 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 Morningstar Small Cap 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 600 has no effect on the direction of IShares Morningstar i.e., IShares Morningstar and SPDR SP go up and down completely randomly.
Pair Corralation between IShares Morningstar and SPDR SP
Considering the 90-day investment horizon IShares Morningstar is expected to generate 1.09 times less return on investment than SPDR SP. But when comparing it to its historical volatility, iShares Morningstar Small Cap is 1.13 times less risky than SPDR SP. It trades about 0.23 of its potential returns per unit of risk. SPDR SP 600 is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 9,201 in SPDR SP 600 on August 28, 2024 and sell it today you would earn a total of 766.00 from holding SPDR SP 600 or generate 8.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Morningstar Small Cap vs. SPDR SP 600
Performance |
| Timeline |
| iShares Morningstar |
| SPDR SP 600 |
IShares Morningstar and SPDR SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Morningstar and SPDR SP
The main advantage of trading using opposite IShares Morningstar and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Morningstar 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 Morningstar vs. Invesco DWA Momentum | IShares Morningstar vs. Invesco DWA Developed | IShares Morningstar vs. Invesco DWA Emerging | IShares Morningstar vs. First Trust Small |
| SPDR SP vs. Invesco DWA Momentum | SPDR SP vs. Invesco DWA Developed | SPDR SP vs. Invesco DWA Emerging | SPDR SP vs. First Trust Small |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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