Correlation Between SPDR SP and IShares Focused
Can any of the company-specific risk be diversified away by investing in both SPDR SP and IShares Focused 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 Focused into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR SP 400 and iShares Focused Value, you can compare the effects of market volatilities on SPDR SP and IShares Focused 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 Focused. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and IShares Focused.
Diversification Opportunities for SPDR SP and IShares Focused
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between SPDR and IShares is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP 400 and iShares Focused Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Focused Value 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 400 are associated (or correlated) with IShares Focused. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Focused Value has no effect on the direction of SPDR SP i.e., SPDR SP and IShares Focused go up and down completely randomly.
Pair Corralation between SPDR SP and IShares Focused
Given the investment horizon of 90 days SPDR SP is expected to generate 1.45 times less return on investment than IShares Focused. But when comparing it to its historical volatility, SPDR SP 400 is 1.09 times less risky than IShares Focused. It trades about 0.12 of its potential returns per unit of risk. iShares Focused Value is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 6,005 in iShares Focused Value on September 1, 2024 and sell it today you would earn a total of 1,601 from holding iShares Focused Value or generate 26.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.21% |
| Values | Daily Returns |
SPDR SP 400 vs. iShares Focused Value
Performance |
| Timeline |
| SPDR SP 400 |
| iShares Focused Value |
SPDR SP and IShares Focused Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR SP and IShares Focused
The main advantage of trading using opposite SPDR SP and IShares Focused positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP position performs unexpectedly, IShares Focused 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 Focused will offset losses from the drop in IShares Focused's long position.The idea behind SPDR SP 400 and iShares Focused Value pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| IShares Focused vs. Vanguard Mid Cap Value | IShares Focused vs. SPDR SP Dividend | IShares Focused vs. Pacer Cash Cows | IShares Focused vs. iShares SP Mid Cap |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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