Correlation Between SPDR SP and IShares Financials
Can any of the company-specific risk be diversified away by investing in both SPDR SP and IShares Financials 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 SPDR SP and IShares Financials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR SP Bank and iShares Financials ETF, you can compare the effects of market volatilities on SPDR SP and IShares Financials 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 SPDR SP with a short position of IShares Financials. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and IShares Financials.
Diversification Opportunities for SPDR SP and IShares Financials
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between SPDR and IShares is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP Bank and iShares Financials ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Financials ETF and SPDR SP 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 SPDR SP Bank are associated (or correlated) with IShares Financials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Financials ETF has no effect on the direction of SPDR SP i.e., SPDR SP and IShares Financials go up and down completely randomly.
Pair Corralation between SPDR SP and IShares Financials
Considering the 90-day investment horizon SPDR SP Bank is expected to generate 1.71 times more return on investment than IShares Financials. However, SPDR SP is 1.71 times more volatile than iShares Financials ETF. It trades about 0.23 of its potential returns per unit of risk. iShares Financials ETF is currently generating about 0.26 per unit of risk. If you would invest 5,374 in SPDR SP Bank on August 26, 2024 and sell it today you would earn a total of 789.00 from holding SPDR SP Bank or generate 14.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR SP Bank vs. iShares Financials ETF
Performance |
| Timeline |
| SPDR SP Bank |
| iShares Financials ETF |
SPDR SP and IShares Financials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR SP and IShares Financials
The main advantage of trading using opposite SPDR SP and IShares Financials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP position performs unexpectedly, IShares Financials 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 IShares Financials will offset losses from the drop in IShares Financials' long position.| SPDR SP vs. UBS AG London | SPDR SP vs. UBS AG London | SPDR SP vs. ETRACS Quarterly Pay | SPDR SP vs. ETRACS 2xMonthly Pay |
| IShares Financials vs. UBS AG London | IShares Financials vs. UBS AG London | IShares Financials vs. ETRACS Quarterly Pay | IShares Financials vs. ETRACS 2xMonthly Pay |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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