Correlation Between SPDR SP and IShares Europe
Can any of the company-specific risk be diversified away by investing in both SPDR SP and IShares Europe 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 Europe 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 Europe ETF, you can compare the effects of market volatilities on SPDR SP and IShares Europe 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 Europe. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and IShares Europe.
Diversification Opportunities for SPDR SP and IShares Europe
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between SPDR and IShares is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP 500 and iShares Europe ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Europe ETF 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 Europe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Europe ETF has no effect on the direction of SPDR SP i.e., SPDR SP and IShares Europe go up and down completely randomly.
Pair Corralation between SPDR SP and IShares Europe
Considering the 90-day investment horizon SPDR SP 500 is expected to generate 0.96 times more return on investment than IShares Europe. However, SPDR SP 500 is 1.05 times less risky than IShares Europe. It trades about 0.16 of its potential returns per unit of risk. iShares Europe ETF is currently generating about -0.29 per unit of risk. If you would invest 58,083 in SPDR SP 500 on August 28, 2024 and sell it today you would earn a total of 1,670 from holding SPDR SP 500 or generate 2.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR SP 500 vs. iShares Europe ETF
Performance |
| Timeline |
| SPDR SP 500 |
| iShares Europe ETF |
SPDR SP and IShares Europe Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR SP and IShares Europe
The main advantage of trading using opposite SPDR SP and IShares Europe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP position performs unexpectedly, IShares Europe 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 Europe will offset losses from the drop in IShares Europe's long position.| SPDR SP vs. FT Vest Equity | SPDR SP vs. Northern Lights | SPDR SP vs. Dimensional International High | SPDR SP vs. First Trust Exchange Traded |
| IShares Europe vs. WisdomTree International Hedged | IShares Europe vs. WisdomTree Emerging Markets | IShares Europe vs. WisdomTree Dynamic Currency |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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