Correlation Between IShares MSCI and SPDR BOFA
Can any of the company-specific risk be diversified away by investing in both IShares MSCI and SPDR BOFA 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 MSCI and SPDR BOFA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares MSCI USA and SPDR BOFA MERRILL, you can compare the effects of market volatilities on IShares MSCI and SPDR BOFA 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 MSCI with a short position of SPDR BOFA. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and SPDR BOFA.
Diversification Opportunities for IShares MSCI and SPDR BOFA
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and SPDR is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI USA and SPDR BOFA MERRILL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR BOFA MERRILL and IShares MSCI 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 MSCI USA are associated (or correlated) with SPDR BOFA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR BOFA MERRILL has no effect on the direction of IShares MSCI i.e., IShares MSCI and SPDR BOFA go up and down completely randomly.
Pair Corralation between IShares MSCI and SPDR BOFA
Given the investment horizon of 90 days IShares MSCI is expected to generate 2.69 times less return on investment than SPDR BOFA. But when comparing it to its historical volatility, iShares MSCI USA is 1.89 times less risky than SPDR BOFA. It trades about 0.2 of its potential returns per unit of risk. SPDR BOFA MERRILL is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 1,671 in SPDR BOFA MERRILL on August 28, 2024 and sell it today you would earn a total of 177.00 from holding SPDR BOFA MERRILL or generate 10.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares MSCI USA vs. SPDR BOFA MERRILL
Performance |
| Timeline |
| iShares MSCI USA |
| SPDR BOFA MERRILL |
IShares MSCI and SPDR BOFA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares MSCI and SPDR BOFA
The main advantage of trading using opposite IShares MSCI and SPDR BOFA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI position performs unexpectedly, SPDR BOFA 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 BOFA will offset losses from the drop in SPDR BOFA's long position.| IShares MSCI vs. Invesco Dynamic Large | IShares MSCI vs. Perella Weinberg Partners | IShares MSCI vs. HUMANA INC | IShares MSCI vs. Aquagold International |
| SPDR BOFA vs. Cambria Micro And | SPDR BOFA vs. Invesco Actively Managed | SPDR BOFA vs. iShares Trust | SPDR BOFA vs. EMCS |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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