Correlation Between SPDR SP and IShares
Can any of the company-specific risk be diversified away by investing in both SPDR SP and IShares 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 SP and IShares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR SP 500 and IShares, you can compare the effects of market volatilities on SPDR SP and IShares 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 SP with a short position of IShares. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and IShares.
Diversification Opportunities for SPDR SP and IShares
Excellent diversification
The 3 months correlation between SPDR and IShares is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP 500 and IShares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IShares and SPDR SP 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 SP 500 are associated (or correlated) with IShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IShares has no effect on the direction of SPDR SP i.e., SPDR SP and IShares go up and down completely randomly.
Pair Corralation between SPDR SP and IShares
Considering the 90-day investment horizon SPDR SP 500 is expected to generate 1.02 times more return on investment than IShares. However, SPDR SP is 1.02 times more volatile than IShares. It trades about 0.17 of its potential returns per unit of risk. IShares is currently generating about 0.11 per unit of risk. If you would invest 42,988 in SPDR SP 500 on September 1, 2024 and sell it today you would earn a total of 17,267 from holding SPDR SP 500 or generate 40.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 71.75% |
| Values | Daily Returns |
SPDR SP 500 vs. IShares
Performance |
| Timeline |
| SPDR SP 500 |
| IShares |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
SPDR SP and IShares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR SP and IShares
The main advantage of trading using opposite SPDR SP and IShares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP position performs unexpectedly, IShares 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 will offset losses from the drop in IShares' long position.| SPDR SP vs. Vanguard Total Stock | SPDR SP vs. Vanguard FTSE Emerging | SPDR SP vs. FT Vest Equity | SPDR SP vs. Zillow Group Class |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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