Correlation Between SPDR Portfolio and IShares Russell
Can any of the company-specific risk be diversified away by investing in both SPDR Portfolio and IShares Russell 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 Portfolio and IShares Russell into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR Portfolio SP and iShares Russell 1000, you can compare the effects of market volatilities on SPDR Portfolio and IShares Russell 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 Portfolio with a short position of IShares Russell. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Portfolio and IShares Russell.
Diversification Opportunities for SPDR Portfolio and IShares Russell
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 Portfolio SP and iShares Russell 1000 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Russell 1000 and SPDR Portfolio 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 Portfolio SP are associated (or correlated) with IShares Russell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Russell 1000 has no effect on the direction of SPDR Portfolio i.e., SPDR Portfolio and IShares Russell go up and down completely randomly.
Pair Corralation between SPDR Portfolio and IShares Russell
Given the investment horizon of 90 days SPDR Portfolio is expected to generate 1.2 times less return on investment than IShares Russell. But when comparing it to its historical volatility, SPDR Portfolio SP is 1.02 times less risky than IShares Russell. It trades about 0.13 of its potential returns per unit of risk. iShares Russell 1000 is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 37,866 in iShares Russell 1000 on August 24, 2024 and sell it today you would earn a total of 1,506 from holding iShares Russell 1000 or generate 3.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR Portfolio SP vs. iShares Russell 1000
Performance |
| Timeline |
| SPDR Portfolio SP |
| iShares Russell 1000 |
SPDR Portfolio and IShares Russell Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR Portfolio and IShares Russell
The main advantage of trading using opposite SPDR Portfolio and IShares Russell positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR Portfolio position performs unexpectedly, IShares Russell 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 Russell will offset losses from the drop in IShares Russell's long position.| SPDR Portfolio vs. FT Vest Equity | SPDR Portfolio vs. Northern Lights | SPDR Portfolio vs. Dimensional International High | SPDR Portfolio vs. First Trust Exchange Traded |
| IShares Russell vs. iShares Russell 1000 | IShares Russell vs. iShares Russell 2000 | IShares Russell vs. iShares Russell 2000 | IShares Russell vs. iShares Russell 1000 |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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