Correlation Between SP Funds and IShares 1
Can any of the company-specific risk be diversified away by investing in both SP Funds and IShares 1 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 SP Funds and IShares 1 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SP Funds Dow and iShares 1 3 Year, you can compare the effects of market volatilities on SP Funds and IShares 1 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 SP Funds with a short position of IShares 1. Check out your portfolio center. Please also check ongoing floating volatility patterns of SP Funds and IShares 1.
Diversification Opportunities for SP Funds and IShares 1
Poor diversification
The 3 months correlation between SPSK and IShares is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding SP Funds Dow and iShares 1 3 Year in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares 1 3 and SP Funds 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 SP Funds Dow are associated (or correlated) with IShares 1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares 1 3 has no effect on the direction of SP Funds i.e., SP Funds and IShares 1 go up and down completely randomly.
Pair Corralation between SP Funds and IShares 1
Given the investment horizon of 90 days SP Funds Dow is expected to generate 1.22 times more return on investment than IShares 1. However, SP Funds is 1.22 times more volatile than iShares 1 3 Year. It trades about 0.05 of its potential returns per unit of risk. iShares 1 3 Year is currently generating about -0.01 per unit of risk. If you would invest 1,749 in SP Funds Dow on August 24, 2024 and sell it today you would earn a total of 56.00 from holding SP Funds Dow or generate 3.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SP Funds Dow vs. iShares 1 3 Year
Performance |
| Timeline |
| SP Funds Dow |
| iShares 1 3 |
SP Funds and IShares 1 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SP Funds and IShares 1
The main advantage of trading using opposite SP Funds and IShares 1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SP Funds position performs unexpectedly, IShares 1 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 1 will offset losses from the drop in IShares 1's long position.| SP Funds vs. Invesco Fundamental Investment | SP Funds vs. iShares International High | SP Funds vs. VanEck International High |
| IShares 1 vs. Invesco Fundamental Investment | IShares 1 vs. iShares International High | IShares 1 vs. VanEck International High |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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