Correlation Between SPDR MSCI and SPDR Bloomberg

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

By analyzing existing cross correlation between SPDR MSCI Europe and SPDR Bloomberg Global, you can compare the effects of market volatilities on SPDR MSCI and SPDR Bloomberg 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 SPDR Bloomberg. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR MSCI and SPDR Bloomberg.

Diversification Opportunities for SPDR MSCI and SPDR Bloomberg

-0.37

Correlation Coefficient

SPDR MSCI  SPDR Bloomberg

Very good diversification

The 3 months correlation between SPDR and SPDR is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding SPDR MSCI Europe and SPDR Bloomberg Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Bloomberg Global 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 Europe are associated (or correlated) with SPDR Bloomberg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Bloomberg Global has no effect on the direction of SPDR MSCI i.e., SPDR MSCI and SPDR Bloomberg go up and down completely randomly.

Pair Corralation between SPDR MSCI and SPDR Bloomberg

Assuming the 90 days trading horizon SPDR MSCI Europe is expected to generate 2.52 times more return on investment than SPDR Bloomberg. However, SPDR MSCI is 2.52 times more volatile than SPDR Bloomberg Global. It trades about 0.04 of its potential returns per unit of risk. SPDR Bloomberg Global is currently generating about -0.01 per unit of risk. If you would invest  4,297  in SPDR MSCI Europe on October 25, 2024 and sell it today you would earn a total of  550.00  from holding SPDR MSCI Europe or generate 12.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	85.37%
Values	Daily Returns

SPDR MSCI Europe  vs.  SPDR Bloomberg Global

SPDR MSCI Europe

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR MSCI Europe are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, SPDR MSCI is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

SPDR Bloomberg Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR Bloomberg Global has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, SPDR Bloomberg is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with SPDR MSCI and SPDR Bloomberg

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

The idea behind SPDR MSCI Europe and SPDR Bloomberg Global 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.