Correlation Between SPDR Dow and IShares Basic
Can any of the company-specific risk be diversified away by investing in both SPDR Dow and IShares Basic 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 Dow and IShares Basic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR Dow Jones and iShares Basic Materials, you can compare the effects of market volatilities on SPDR Dow and IShares Basic 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 Dow with a short position of IShares Basic. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Dow and IShares Basic.
Diversification Opportunities for SPDR Dow and IShares Basic
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between SPDR and IShares is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Dow Jones and iShares Basic Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Basic Materials and SPDR Dow 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 Dow Jones are associated (or correlated) with IShares Basic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Basic Materials has no effect on the direction of SPDR Dow i.e., SPDR Dow and IShares Basic go up and down completely randomly.
Pair Corralation between SPDR Dow and IShares Basic
Considering the 90-day investment horizon SPDR Dow Jones is expected to generate 1.14 times more return on investment than IShares Basic. However, SPDR Dow is 1.14 times more volatile than iShares Basic Materials. It trades about 0.06 of its potential returns per unit of risk. iShares Basic Materials is currently generating about 0.05 per unit of risk. If you would invest 8,419 in SPDR Dow Jones on August 31, 2024 and sell it today you would earn a total of 2,442 from holding SPDR Dow Jones or generate 29.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR Dow Jones vs. iShares Basic Materials
Performance |
| Timeline |
| SPDR Dow Jones |
| iShares Basic Materials |
SPDR Dow and IShares Basic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR Dow and IShares Basic
The main advantage of trading using opposite SPDR Dow and IShares Basic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR Dow position performs unexpectedly, IShares Basic 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 Basic will offset losses from the drop in IShares Basic's long position.| SPDR Dow vs. iShares Cohen Steers | SPDR Dow vs. iShares Real Estate | SPDR Dow vs. SPDR Dow Jones | SPDR Dow vs. iShares Utilities ETF |
| IShares Basic vs. Mast Global Battery | IShares Basic vs. Materials Select Sector | IShares Basic vs. Vanguard Materials Index | IShares Basic vs. SPDR SP Metals |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
Other Complementary Tools
| Content Syndication Quickly integrate customizable finance content to your own investment portal | |
| Share Portfolio Track or share privately all of your investments from the convenience of any device | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
| Equity Valuation Check real value of public entities based on technical and fundamental data |