Correlation Between SPDR SP and IShares Core
Can any of the company-specific risk be diversified away by investing in both SPDR SP and IShares Core 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 Core 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 Core SP, you can compare the effects of market volatilities on SPDR SP and IShares Core 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 Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and IShares Core.
Diversification Opportunities for SPDR SP and IShares Core
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between SPDR and IShares is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP 500 and iShares Core SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core SP 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 Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Core SP has no effect on the direction of SPDR SP i.e., SPDR SP and IShares Core go up and down completely randomly.
Pair Corralation between SPDR SP and IShares Core
Considering the 90-day investment horizon SPDR SP is expected to generate 1.01 times less return on investment than IShares Core. But when comparing it to its historical volatility, SPDR SP 500 is 1.0 times less risky than IShares Core. It trades about 0.18 of its potential returns per unit of risk. iShares Core SP is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 58,365 in iShares Core SP on August 29, 2024 and sell it today you would earn a total of 2,011 from holding iShares Core SP or generate 3.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR SP 500 vs. iShares Core SP
Performance |
| Timeline |
| SPDR SP 500 |
| iShares Core SP |
SPDR SP and IShares Core Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR SP and IShares Core
The main advantage of trading using opposite SPDR SP and IShares Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP position performs unexpectedly, IShares Core 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 Core will offset losses from the drop in IShares Core'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 Core vs. iShares Core SP | IShares Core vs. iShares Core SP | IShares Core vs. iShares SP 500 | IShares Core vs. iShares Russell 2000 |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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