Correlation Between SSgA SPDR and SPDR MSCI
Can any of the company-specific risk be diversified away by investing in both SSgA SPDR 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 SSgA SPDR and SPDR MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SSgA SPDR ETFs and SPDR MSCI Europe, you can compare the effects of market volatilities on SSgA SPDR 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 SSgA SPDR with a short position of SPDR MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of SSgA SPDR and SPDR MSCI.
Diversification Opportunities for SSgA SPDR and SPDR MSCI
Very poor diversification
The 3 months correlation between SSgA and SPDR is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding SSgA SPDR ETFs and SPDR MSCI Europe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR MSCI Europe and SSgA SPDR 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 SSgA SPDR ETFs 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 Europe has no effect on the direction of SSgA SPDR i.e., SSgA SPDR and SPDR MSCI go up and down completely randomly.
Pair Corralation between SSgA SPDR and SPDR MSCI
Assuming the 90 days trading horizon SSgA SPDR ETFs is expected to generate 0.69 times more return on investment than SPDR MSCI. However, SSgA SPDR ETFs is 1.45 times less risky than SPDR MSCI. It trades about -0.32 of its potential returns per unit of risk. SPDR MSCI Europe is currently generating about -0.36 per unit of risk. If you would invest 22,270 in SSgA SPDR ETFs on August 24, 2024 and sell it today you would lose (1,135) from holding SSgA SPDR ETFs or give up 5.1% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
SSgA SPDR ETFs vs. SPDR MSCI Europe
Performance |
| Timeline |
| SSgA SPDR ETFs |
| SPDR MSCI Europe |
SSgA SPDR and SPDR MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SSgA SPDR and SPDR MSCI
The main advantage of trading using opposite SSgA SPDR and SPDR MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SSgA SPDR 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.| SSgA SPDR vs. SSgA SPDR ETFs | SSgA SPDR vs. SSgA SPDR ETFs | SSgA SPDR vs. SSgA SPDR ETFs | SSgA SPDR vs. SSgA SPDR ETFs |
| SPDR MSCI vs. SSgA SPDR ETFs | SPDR MSCI vs. SPDR MSCI Europe | SPDR MSCI vs. SPDR MSCI Europe | SPDR MSCI vs. SPDR MSCI Europe |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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