Correlation Between SPDR MSCI and SPDR SSGA
Can any of the company-specific risk be diversified away by investing in both SPDR MSCI and SPDR SSGA 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 SSGA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR MSCI USA and SPDR SSGA Small, you can compare the effects of market volatilities on SPDR MSCI and SPDR SSGA 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 SSGA. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR MSCI and SPDR SSGA.
Diversification Opportunities for SPDR MSCI and SPDR SSGA
Very poor diversification
The 3 months correlation between SPDR and SPDR is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding SPDR MSCI USA and SPDR SSGA Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SSGA Small 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 USA are associated (or correlated) with SPDR SSGA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SSGA Small has no effect on the direction of SPDR MSCI i.e., SPDR MSCI and SPDR SSGA go up and down completely randomly.
Pair Corralation between SPDR MSCI and SPDR SSGA
Considering the 90-day investment horizon SPDR MSCI is expected to generate 2.01 times less return on investment than SPDR SSGA. But when comparing it to its historical volatility, SPDR MSCI USA is 3.2 times less risky than SPDR SSGA. It trades about 0.35 of its potential returns per unit of risk. SPDR SSGA Small is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 12,525 in SPDR SSGA Small on September 1, 2024 and sell it today you would earn a total of 1,378 from holding SPDR SSGA Small or generate 11.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
SPDR MSCI USA vs. SPDR SSGA Small
Performance |
| Timeline |
| SPDR MSCI USA |
| SPDR SSGA Small |
SPDR MSCI and SPDR SSGA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR MSCI and SPDR SSGA
The main advantage of trading using opposite SPDR MSCI and SPDR SSGA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR MSCI position performs unexpectedly, SPDR SSGA 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 SSGA will offset losses from the drop in SPDR SSGA's long position.| SPDR MSCI vs. SPDR SSGA Large | SPDR MSCI vs. SPDR MSCI EAFE | SPDR MSCI vs. SPDR MSCI Emerging | SPDR MSCI vs. SPDR Russell 1000 |
| SPDR SSGA vs. SPDR SSGA Large | SPDR SSGA vs. Invesco SP SmallCap | SPDR SSGA vs. Invesco SP MidCap | SPDR SSGA vs. SPDR MSCI EAFE |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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