Correlation Between SPDR SP and IShares Emerging
Can any of the company-specific risk be diversified away by investing in both SPDR SP and IShares Emerging 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 Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR SP Global and iShares Emerging Markets, you can compare the effects of market volatilities on SPDR SP and IShares Emerging 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 Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and IShares Emerging.
Diversification Opportunities for SPDR SP and IShares Emerging
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SPDR and IShares is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP Global and iShares Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Emerging Markets 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 Global are associated (or correlated) with IShares Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Emerging Markets has no effect on the direction of SPDR SP i.e., SPDR SP and IShares Emerging go up and down completely randomly.
Pair Corralation between SPDR SP and IShares Emerging
Given the investment horizon of 90 days SPDR SP is expected to generate 1.33 times less return on investment than IShares Emerging. But when comparing it to its historical volatility, SPDR SP Global is 2.2 times less risky than IShares Emerging. It trades about 0.07 of its potential returns per unit of risk. iShares Emerging Markets is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 2,637 in iShares Emerging Markets on September 3, 2024 and sell it today you would earn a total of 72.00 from holding iShares Emerging Markets or generate 2.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR SP Global vs. iShares Emerging Markets
Performance |
| Timeline |
| SPDR SP Global |
| iShares Emerging Markets |
SPDR SP and IShares Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR SP and IShares Emerging
The main advantage of trading using opposite SPDR SP and IShares Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP position performs unexpectedly, IShares Emerging 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 Emerging will offset losses from the drop in IShares Emerging's long position.| SPDR SP vs. SPDR SP Emerging | SPDR SP vs. First Trust Dow | SPDR SP vs. iShares AsiaPacific Dividend | SPDR SP vs. iShares Emerging Markets |
| IShares Emerging vs. SCOR PK | IShares Emerging vs. HUMANA INC | IShares Emerging vs. Aquagold International | IShares Emerging vs. Barloworld Ltd ADR |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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