Correlation Between SPDR SP and SPDR MSCI
Can any of the company-specific risk be diversified away by investing in both SPDR SP and SPDR MSCI 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 SPDR MSCI 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 SPDR MSCI World, you can compare the effects of market volatilities on SPDR SP and SPDR MSCI 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 SPDR MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and SPDR MSCI.
Diversification Opportunities for SPDR SP and SPDR MSCI
Poor diversification
The 3 months correlation between SPDR and SPDR is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP 500 and SPDR MSCI World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR MSCI World 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 SPDR MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR MSCI World has no effect on the direction of SPDR SP i.e., SPDR SP and SPDR MSCI go up and down completely randomly.
Pair Corralation between SPDR SP and SPDR MSCI
Considering the 90-day investment horizon SPDR SP 500 is expected to generate 1.28 times more return on investment than SPDR MSCI. However, SPDR SP is 1.28 times more volatile than SPDR MSCI World. It trades about 0.13 of its potential returns per unit of risk. SPDR MSCI World is currently generating about 0.11 per unit of risk. If you would invest 48,463 in SPDR SP 500 on August 29, 2024 and sell it today you would earn a total of 11,602 from holding SPDR SP 500 or generate 23.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR SP 500 vs. SPDR MSCI World
Performance |
| Timeline |
| SPDR SP 500 |
| SPDR MSCI World |
SPDR SP and SPDR MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR SP and SPDR MSCI
The main advantage of trading using opposite SPDR SP and SPDR MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP position performs unexpectedly, SPDR MSCI 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 SPDR MSCI will offset losses from the drop in SPDR MSCI'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 |
| SPDR MSCI vs. SPDR MSCI EAFE | SPDR MSCI vs. SPDR MSCI Emerging | SPDR MSCI vs. SPDR MSCI USA | SPDR MSCI vs. SPDR SP 1500 |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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