Correlation Between SPDR SP and SPDR MSCI
Can any of the company-specific risk be diversified away by investing in both SPDR SP 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 SPDR SP and SPDR MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR SP World and SPDR MSCI World, you can compare the effects of market volatilities on SPDR SP 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 SPDR SP with a short position of SPDR MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and SPDR MSCI.
Diversification Opportunities for SPDR SP and SPDR MSCI
Very poor diversification
The 3 months correlation between SPDR and SPDR is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP World and SPDR MSCI World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR MSCI World 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 World 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 World has no effect on the direction of SPDR SP i.e., SPDR SP and SPDR MSCI go up and down completely randomly.
Pair Corralation between SPDR SP and SPDR MSCI
Assuming the 90 days trading horizon SPDR SP World is expected to generate 0.42 times more return on investment than SPDR MSCI. However, SPDR SP World is 2.38 times less risky than SPDR MSCI. It trades about 0.41 of its potential returns per unit of risk. SPDR MSCI World is currently generating about 0.07 per unit of risk. If you would invest 4,576 in SPDR SP World on September 3, 2024 and sell it today you would earn a total of 215.00 from holding SPDR SP World or generate 4.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR SP World vs. SPDR MSCI World
Performance |
| Timeline |
| SPDR SP World |
| SPDR MSCI World |
SPDR SP and SPDR MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR SP and SPDR MSCI
The main advantage of trading using opposite SPDR SP and SPDR MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP 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.| SPDR SP vs. Beta Shares SPASX | SPDR SP vs. Vanguard Australian Property | SPDR SP vs. SPDR SP 500 | SPDR SP vs. Vanguard Total Market |
| SPDR MSCI vs. Beta Shares SPASX | SPDR MSCI vs. Vanguard Australian Property | SPDR MSCI vs. SPDR SP 500 | SPDR MSCI vs. Vanguard Total Market |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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