Correlation Between SPDR SP and IShares Trust
Can any of the company-specific risk be diversified away by investing in both SPDR SP and IShares Trust 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 Trust 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 Trust, you can compare the effects of market volatilities on SPDR SP and IShares Trust 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 Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and IShares Trust.
Diversification Opportunities for SPDR SP and IShares Trust
-0.17 | Correlation Coefficient |
Good diversification
The 3 months correlation between SPDR and IShares is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP 500 and iShares Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Trust 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 Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Trust has no effect on the direction of SPDR SP i.e., SPDR SP and IShares Trust go up and down completely randomly.
Pair Corralation between SPDR SP and IShares Trust
Considering the 90-day investment horizon SPDR SP is expected to generate 211.15 times less return on investment than IShares Trust. But when comparing it to its historical volatility, SPDR SP 500 is 331.01 times less risky than IShares Trust. It trades about 0.38 of its potential returns per unit of risk. iShares Trust is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 0.00 in iShares Trust on September 1, 2024 and sell it today you would earn a total of 2,509 from holding iShares Trust or generate 9.223372036854776E16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 80.95% |
| Values | Daily Returns |
SPDR SP 500 vs. iShares Trust
Performance |
| Timeline |
| SPDR SP 500 |
| iShares Trust |
SPDR SP and IShares Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR SP and IShares Trust
The main advantage of trading using opposite SPDR SP and IShares Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP position performs unexpectedly, IShares Trust 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 Trust will offset losses from the drop in IShares Trust's 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 |
| IShares Trust vs. Vanguard Total Stock | IShares Trust vs. SPDR SP 500 | IShares Trust vs. iShares Core SP | IShares Trust vs. Vanguard Total Bond |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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