Correlation Between SPDR SP and IShares MSCI
Can any of the company-specific risk be diversified away by investing in both SPDR SP and IShares 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 IShares 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 iShares MSCI Japan, you can compare the effects of market volatilities on SPDR SP and IShares 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 IShares MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and IShares MSCI.
Diversification Opportunities for SPDR SP and IShares MSCI
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SPDR and IShares is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP 500 and iShares MSCI Japan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI Japan 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 MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares MSCI Japan has no effect on the direction of SPDR SP i.e., SPDR SP and IShares MSCI go up and down completely randomly.
Pair Corralation between SPDR SP and IShares MSCI
Considering the 90-day investment horizon SPDR SP is expected to generate 2.45 times less return on investment than IShares MSCI. But when comparing it to its historical volatility, SPDR SP 500 is 1.25 times less risky than IShares MSCI. It trades about 0.15 of its potential returns per unit of risk. iShares MSCI Japan is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 7,202 in iShares MSCI Japan on November 18, 2024 and sell it today you would earn a total of 366.00 from holding iShares MSCI Japan or generate 5.08% 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. iShares MSCI Japan
Performance |
| Timeline |
| SPDR SP 500 |
| iShares MSCI Japan |
SPDR SP and IShares MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR SP and IShares MSCI
The main advantage of trading using opposite SPDR SP and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP position performs unexpectedly, IShares 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 IShares MSCI will offset losses from the drop in IShares MSCI's long position.| SPDR SP vs. FT Vest Equity | SPDR SP vs. Zillow Group Class | SPDR SP vs. Northern Lights | SPDR SP vs. VanEck Vectors Moodys |
| IShares MSCI vs. WisdomTree Japan SmallCap | IShares MSCI vs. iShares MSCI Israel | IShares MSCI vs. iShares MSCI Kokusai | IShares MSCI vs. iShares MSCI China |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
Other Complementary Tools
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| Transaction History View history of all your transactions and understand their impact on performance | |
| Content Syndication Quickly integrate customizable finance content to your own investment portal | |
| Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities |