Correlation Between SPDR MSCI and IShares MSCI

Can any of the company-specific risk be diversified away by investing in both SPDR MSCI and IShares 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 MSCI and IShares MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SPDR MSCI Emerging and iShares MSCI ACWI, you can compare the effects of market volatilities on SPDR MSCI and IShares 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 MSCI with a short position of IShares MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR MSCI and IShares MSCI.

Diversification Opportunities for SPDR MSCI and IShares MSCI

0.04

Correlation Coefficient

SPDR MSCI  IShares MSCI

Significant diversification

The 3 months correlation between SPDR and IShares is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding SPDR MSCI Emerging and iShares MSCI ACWI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI ACWI 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 Emerging are associated (or correlated) with IShares MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares MSCI ACWI has no effect on the direction of SPDR MSCI i.e., SPDR MSCI and IShares MSCI go up and down completely randomly.

Pair Corralation between SPDR MSCI and IShares MSCI

Given the investment horizon of 90 days SPDR MSCI Emerging is expected to under-perform the IShares MSCI. In addition to that, SPDR MSCI is 1.2 times more volatile than iShares MSCI ACWI. It trades about -0.07 of its total potential returns per unit of risk. iShares MSCI ACWI is currently generating about 0.08 per unit of volatility. If you would invest  19,381  in iShares MSCI ACWI on October 26, 2024 and sell it today you would earn a total of  652.00  from holding iShares MSCI ACWI or generate 3.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

SPDR MSCI Emerging  vs.  iShares MSCI ACWI

SPDR MSCI Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR MSCI Emerging has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong primary indicators, SPDR MSCI is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

iShares MSCI ACWI

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI ACWI are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental drivers, IShares MSCI is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with SPDR MSCI and IShares MSCI

The main advantage of trading using opposite SPDR MSCI and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR MSCI position performs unexpectedly, IShares 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 IShares MSCI will offset losses from the drop in IShares MSCI's long position.

The idea behind SPDR MSCI Emerging and iShares MSCI ACWI 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.

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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.