Correlation Between SPDR SP and IShares Global
Can any of the company-specific risk be diversified away by investing in both SPDR SP and IShares Global 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 Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR SP Insurance and iShares Global Financials, you can compare the effects of market volatilities on SPDR SP and IShares Global 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 Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and IShares Global.
Diversification Opportunities for SPDR SP and IShares Global
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between SPDR and IShares is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP Insurance and iShares Global Financials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Global Financials 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 Insurance are associated (or correlated) with IShares Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Global Financials has no effect on the direction of SPDR SP i.e., SPDR SP and IShares Global go up and down completely randomly.
Pair Corralation between SPDR SP and IShares Global
Considering the 90-day investment horizon SPDR SP Insurance is expected to generate 1.29 times more return on investment than IShares Global. However, SPDR SP is 1.29 times more volatile than iShares Global Financials. It trades about 0.43 of its potential returns per unit of risk. iShares Global Financials is currently generating about 0.34 per unit of risk. If you would invest 5,603 in SPDR SP Insurance on September 1, 2024 and sell it today you would earn a total of 594.00 from holding SPDR SP Insurance or generate 10.6% 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 Insurance vs. iShares Global Financials
Performance |
| Timeline |
| SPDR SP Insurance |
| iShares Global Financials |
SPDR SP and IShares Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR SP and IShares Global
The main advantage of trading using opposite SPDR SP and IShares Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP position performs unexpectedly, IShares Global 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 Global will offset losses from the drop in IShares Global's long position.| SPDR SP vs. Vanguard Financials Index | SPDR SP vs. SPDR SP Bank | SPDR SP vs. Fidelity MSCI Financials | SPDR SP vs. iShares MSCI Europe |
| IShares Global vs. Vanguard Financials Index | IShares Global vs. SPDR SP Bank | IShares Global vs. Fidelity MSCI Financials | IShares Global vs. iShares MSCI Europe |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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