Correlation Between SPDR Morningstar and SPDR MSCI

Can any of the company-specific risk be diversified away by investing in both SPDR Morningstar 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 Morningstar 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 Morningstar Multi Asset and SPDR MSCI Europe, you can compare the effects of market volatilities on SPDR Morningstar 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 Morningstar with a short position of SPDR MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Morningstar and SPDR MSCI.

Diversification Opportunities for SPDR Morningstar and SPDR MSCI

0.06

Correlation Coefficient

SPDR Morningstar  SPDR MSCI

Significant diversification

The 3 months correlation between SPDR and SPDR is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Morningstar Multi Asset and SPDR MSCI Europe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR MSCI Europe and SPDR Morningstar 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 Morningstar Multi Asset 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 Europe has no effect on the direction of SPDR Morningstar i.e., SPDR Morningstar and SPDR MSCI go up and down completely randomly.

Pair Corralation between SPDR Morningstar and SPDR MSCI

Assuming the 90 days trading horizon SPDR Morningstar Multi Asset is expected to under-perform the SPDR MSCI. But the etf apears to be less risky and, when comparing its historical volatility, SPDR Morningstar Multi Asset is 1.03 times less risky than SPDR MSCI. The etf trades about -0.01 of its potential returns per unit of risk. The SPDR MSCI Europe is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,015  in SPDR MSCI Europe on December 29, 2024 and sell it today you would earn a total of  70.00  from holding SPDR MSCI Europe or generate 6.9% return on investment over 90 days.

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

SPDR Morningstar Multi Asset  vs.  SPDR MSCI Europe

SPDR Morningstar Multi

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR Morningstar Multi Asset has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, SPDR Morningstar is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

SPDR MSCI Europe

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR MSCI Europe are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, SPDR MSCI may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with SPDR Morningstar and SPDR MSCI

The main advantage of trading using opposite SPDR Morningstar and SPDR MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR Morningstar 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.

The idea behind SPDR Morningstar Multi Asset and SPDR MSCI 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 Global Correlations module to find global opportunities by holding instruments from different markets.