Correlation Between SPDR MSCI and IShares NASDAQ
Can any of the company-specific risk be diversified away by investing in both SPDR MSCI and IShares NASDAQ 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 MSCI and IShares NASDAQ into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR MSCI World and iShares NASDAQ 100, you can compare the effects of market volatilities on SPDR MSCI and IShares NASDAQ 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 MSCI with a short position of IShares NASDAQ. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR MSCI and IShares NASDAQ.
Diversification Opportunities for SPDR MSCI and IShares NASDAQ
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between SPDR and IShares is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding SPDR MSCI World and iShares NASDAQ 100 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares NASDAQ 100 and SPDR MSCI 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 MSCI World are associated (or correlated) with IShares NASDAQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares NASDAQ 100 has no effect on the direction of SPDR MSCI i.e., SPDR MSCI and IShares NASDAQ go up and down completely randomly.
Pair Corralation between SPDR MSCI and IShares NASDAQ
Assuming the 90 days trading horizon SPDR MSCI World is expected to generate 1.23 times more return on investment than IShares NASDAQ. However, SPDR MSCI is 1.23 times more volatile than iShares NASDAQ 100. It trades about 0.08 of its potential returns per unit of risk. iShares NASDAQ 100 is currently generating about 0.08 per unit of risk. If you would invest 14,952 in SPDR MSCI World on September 3, 2024 and sell it today you would earn a total of 2,776 from holding SPDR MSCI World or generate 18.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR MSCI World vs. iShares NASDAQ 100
Performance |
| Timeline |
| SPDR MSCI World |
| iShares NASDAQ 100 |
SPDR MSCI and IShares NASDAQ Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR MSCI and IShares NASDAQ
The main advantage of trading using opposite SPDR MSCI and IShares NASDAQ positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR MSCI position performs unexpectedly, IShares NASDAQ 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 NASDAQ will offset losses from the drop in IShares NASDAQ's long position.| SPDR MSCI vs. SPDR MSCI Europe | SPDR MSCI vs. SPDR SP Utilities | SPDR MSCI vs. SPDR MSCI Europe | SPDR MSCI vs. SPDR MSCI EM |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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