Correlation Between SPDR SP and IShares North
Can any of the company-specific risk be diversified away by investing in both SPDR SP and IShares North 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 North into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR SP Metals and iShares North American, you can compare the effects of market volatilities on SPDR SP and IShares North 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 North. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and IShares North.
Diversification Opportunities for SPDR SP and IShares North
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between SPDR and IShares is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP Metals and iShares North American in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares North American 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 Metals are associated (or correlated) with IShares North. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares North American has no effect on the direction of SPDR SP i.e., SPDR SP and IShares North go up and down completely randomly.
Pair Corralation between SPDR SP and IShares North
Considering the 90-day investment horizon SPDR SP Metals is expected to generate 1.38 times more return on investment than IShares North. However, SPDR SP is 1.38 times more volatile than iShares North American. It trades about 0.04 of its potential returns per unit of risk. iShares North American is currently generating about 0.04 per unit of risk. If you would invest 5,123 in SPDR SP Metals on August 26, 2024 and sell it today you would earn a total of 1,742 from holding SPDR SP Metals or generate 34.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR SP Metals vs. iShares North American
Performance |
| Timeline |
| SPDR SP Metals |
| iShares North American |
SPDR SP and IShares North Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR SP and IShares North
The main advantage of trading using opposite SPDR SP and IShares North positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP position performs unexpectedly, IShares North 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 North will offset losses from the drop in IShares North's long position.The idea behind SPDR SP Metals and iShares North American pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| IShares North vs. Sprott Junior Copper | IShares North vs. Sprott Junior Uranium | IShares North vs. Sprott Nickel Miners |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
Other Complementary Tools
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges | |
| Fundamental Analysis View fundamental data based on most recent published financial statements | |
| Content Syndication Quickly integrate customizable finance content to your own investment portal | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm |