Correlation Between IShares MSCI and SPDR Portfolio

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Can any of the company-specific risk be diversified away by investing in both IShares MSCI and SPDR Portfolio 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 IShares MSCI and SPDR Portfolio into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares MSCI United and SPDR Portfolio Europe, you can compare the effects of market volatilities on IShares MSCI and SPDR Portfolio 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 IShares MSCI with a short position of SPDR Portfolio. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and SPDR Portfolio.

Diversification Opportunities for IShares MSCI and SPDR Portfolio

0.97
  Correlation Coefficient

Almost no diversification

The 3 months correlation between IShares and SPDR is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI United and SPDR Portfolio Europe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Portfolio Europe and IShares 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 iShares MSCI United are associated (or correlated) with SPDR Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Portfolio Europe has no effect on the direction of IShares MSCI i.e., IShares MSCI and SPDR Portfolio go up and down completely randomly.

Pair Corralation between IShares MSCI and SPDR Portfolio

Considering the 90-day investment horizon IShares MSCI is expected to generate 1.08 times less return on investment than SPDR Portfolio. In addition to that, IShares MSCI is 1.17 times more volatile than SPDR Portfolio Europe. It trades about 0.17 of its total potential returns per unit of risk. SPDR Portfolio Europe is currently generating about 0.21 per unit of volatility. If you would invest  4,053  in SPDR Portfolio Europe on September 17, 2024 and sell it today you would earn a total of  83.00  from holding SPDR Portfolio Europe or generate 2.05% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

iShares MSCI United  vs.  SPDR Portfolio Europe

 Performance 
       Timeline  
iShares MSCI United 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days iShares MSCI United has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, IShares MSCI is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.
SPDR Portfolio Europe 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days SPDR Portfolio Europe has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, SPDR Portfolio is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

IShares MSCI and SPDR Portfolio Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with IShares MSCI and SPDR Portfolio

The main advantage of trading using opposite IShares MSCI and SPDR Portfolio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI position performs unexpectedly, SPDR Portfolio 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 Portfolio will offset losses from the drop in SPDR Portfolio's long position.
The idea behind iShares MSCI United and SPDR Portfolio Europe 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 Stocks Directory module to find actively traded stocks across global markets.

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