Correlation Between SPDR MSCI and IShares ESG
Can any of the company-specific risk be diversified away by investing in both SPDR MSCI and IShares ESG 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 MSCI and IShares ESG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR MSCI EAFE and iShares ESG Aggregate, you can compare the effects of market volatilities on SPDR MSCI and IShares ESG 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 MSCI with a short position of IShares ESG. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR MSCI and IShares ESG.
Diversification Opportunities for SPDR MSCI and IShares ESG
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between SPDR and IShares is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding SPDR MSCI EAFE and iShares ESG Aggregate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares ESG Aggregate and SPDR 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 SPDR MSCI EAFE are associated (or correlated) with IShares ESG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares ESG Aggregate has no effect on the direction of SPDR MSCI i.e., SPDR MSCI and IShares ESG go up and down completely randomly.
Pair Corralation between SPDR MSCI and IShares ESG
Given the investment horizon of 90 days SPDR MSCI EAFE is expected to under-perform the IShares ESG. In addition to that, SPDR MSCI is 2.24 times more volatile than iShares ESG Aggregate. It trades about -0.03 of its total potential returns per unit of risk. iShares ESG Aggregate is currently generating about 0.14 per unit of volatility. If you would invest 4,707 in iShares ESG Aggregate on September 3, 2024 and sell it today you would earn a total of 49.00 from holding iShares ESG Aggregate or generate 1.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR MSCI EAFE vs. iShares ESG Aggregate
Performance |
| Timeline |
| SPDR MSCI EAFE |
| iShares ESG Aggregate |
SPDR MSCI and IShares ESG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR MSCI and IShares ESG
The main advantage of trading using opposite SPDR MSCI and IShares ESG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR MSCI position performs unexpectedly, IShares ESG 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 ESG will offset losses from the drop in IShares ESG's long position.| SPDR MSCI vs. SPDR MSCI Emerging | SPDR MSCI vs. SPDR MSCI USA | SPDR MSCI vs. SPDR MSCI World | SPDR MSCI vs. SPDR SSGA Large |
| IShares ESG vs. ClearShares Ultra Short Maturity | IShares ESG vs. PGIM Active High | IShares ESG vs. Pacer Trendpilot Bond | IShares ESG vs. Pacer Lunt Large |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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