Correlation Between IShares Broad and SPDR SP
Can any of the company-specific risk be diversified away by investing in both IShares Broad and SPDR SP 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 IShares Broad and SPDR SP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Broad USD and SPDR SP 1500, you can compare the effects of market volatilities on IShares Broad and SPDR SP 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 IShares Broad with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Broad and SPDR SP.
Diversification Opportunities for IShares Broad and SPDR SP
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IShares and SPDR is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding iShares Broad USD and SPDR SP 1500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP 1500 and IShares Broad 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 iShares Broad USD are associated (or correlated) with SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP 1500 has no effect on the direction of IShares Broad i.e., IShares Broad and SPDR SP go up and down completely randomly.
Pair Corralation between IShares Broad and SPDR SP
Given the investment horizon of 90 days IShares Broad is expected to generate 3.16 times less return on investment than SPDR SP. But when comparing it to its historical volatility, iShares Broad USD is 1.85 times less risky than SPDR SP. It trades about 0.06 of its potential returns per unit of risk. SPDR SP 1500 is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 13,080 in SPDR SP 1500 on December 1, 2024 and sell it today you would earn a total of 5,827 from holding SPDR SP 1500 or generate 44.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Broad USD vs. SPDR SP 1500
Performance |
| Timeline |
| iShares Broad USD |
| SPDR SP 1500 |
IShares Broad and SPDR SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Broad and SPDR SP
The main advantage of trading using opposite IShares Broad and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Broad position performs unexpectedly, SPDR SP 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 SP will offset losses from the drop in SPDR SP's long position.| IShares Broad vs. iShares 5 10 Year | IShares Broad vs. iShares Broad USD | IShares Broad vs. iShares 1 5 Year | IShares Broad vs. iShares 0 5 Year |
| SPDR SP vs. Davis Select International | SPDR SP vs. Principal Value ETF | SPDR SP vs. WisdomTree Emerging Markets | SPDR SP vs. Ballast SmallMid Cap |
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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