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 USA, 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
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between SPDR and IShares is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP 500 and iShares MSCI USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI USA 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 USA 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 500 is expected to generate 0.96 times more return on investment than IShares MSCI. However, SPDR SP 500 is 1.04 times less risky than IShares MSCI. It trades about 0.18 of its potential returns per unit of risk. iShares MSCI USA is currently generating about 0.17 per unit of risk. If you would invest 41,005 in SPDR SP 500 on August 25, 2024 and sell it today you would earn a total of 18,546 from holding SPDR SP 500 or generate 45.23% 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 MSCI USA
Performance |
| Timeline |
| SPDR SP 500 |
| iShares MSCI USA |
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. Northern Lights | SPDR SP vs. Dimensional International High | SPDR SP vs. First Trust Exchange Traded |
| IShares MSCI vs. iShares Equity Factor | IShares MSCI vs. iShares MSCI USA | IShares MSCI vs. iShares MSCI USA | IShares MSCI vs. iShares Edge MSCI |
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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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