Correlation Between SPDR MSCI and SPDR Russell
Can any of the company-specific risk be diversified away by investing in both SPDR MSCI and SPDR Russell 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 SPDR Russell 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 SPDR Russell 1000, you can compare the effects of market volatilities on SPDR MSCI and SPDR Russell 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 SPDR Russell. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR MSCI and SPDR Russell.
Diversification Opportunities for SPDR MSCI and SPDR Russell
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between SPDR and SPDR is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding SPDR MSCI EAFE and SPDR Russell 1000 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Russell 1000 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 SPDR Russell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Russell 1000 has no effect on the direction of SPDR MSCI i.e., SPDR MSCI and SPDR Russell go up and down completely randomly.
Pair Corralation between SPDR MSCI and SPDR Russell
Given the investment horizon of 90 days SPDR MSCI is expected to generate 4.92 times less return on investment than SPDR Russell. But when comparing it to its historical volatility, SPDR MSCI EAFE is 1.13 times less risky than SPDR Russell. It trades about 0.02 of its potential returns per unit of risk. SPDR Russell 1000 is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 10,950 in SPDR Russell 1000 on August 27, 2024 and sell it today you would earn a total of 1,754 from holding SPDR Russell 1000 or generate 16.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR MSCI EAFE vs. SPDR Russell 1000
Performance |
| Timeline |
| SPDR MSCI EAFE |
| SPDR Russell 1000 |
SPDR MSCI and SPDR Russell Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR MSCI and SPDR Russell
The main advantage of trading using opposite SPDR MSCI and SPDR Russell positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR MSCI position performs unexpectedly, SPDR Russell 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 Russell will offset losses from the drop in SPDR Russell'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 |
| SPDR Russell vs. SPDR Russell 1000 | SPDR Russell vs. SPDR MSCI USA | SPDR Russell vs. SPDR MSCI EAFE | SPDR Russell vs. SPDR SSGA Small |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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