Correlation Between IShares Infrastructure and SPDR SP

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

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

Diversification Opportunities for IShares Infrastructure and SPDR SP

0.6

Correlation Coefficient

IShares Infrastructure  SPDR SP

Poor diversification

The 3 months correlation between IShares and SPDR is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding iShares Infrastructure ETF and SPDR SP Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Global and IShares Infrastructure 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 Infrastructure ETF are associated (or correlated) with SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP Global has no effect on the direction of IShares Infrastructure i.e., IShares Infrastructure and SPDR SP go up and down completely randomly.

Pair Corralation between IShares Infrastructure and SPDR SP

Given the investment horizon of 90 days iShares Infrastructure ETF is expected to under-perform the SPDR SP. But the etf apears to be less risky and, when comparing its historical volatility, iShares Infrastructure ETF is 1.05 times less risky than SPDR SP. The etf trades about -0.06 of its potential returns per unit of risk. The SPDR SP Global is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  6,057  in SPDR SP Global on September 14, 2024 and sell it today you would earn a total of  37.00  from holding SPDR SP Global or generate 0.61% return on investment over 90 days.

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

iShares Infrastructure ETF  vs.  SPDR SP Global

iShares Infrastructure

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Infrastructure ETF are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, IShares Infrastructure may actually be approaching a critical reversion point that can send shares even higher in January 2025.

SPDR SP Global

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days SPDR SP Global has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward indicators, SPDR SP is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with IShares Infrastructure and SPDR SP

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

The idea behind iShares Infrastructure ETF and SPDR SP 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.

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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.