Correlation Between IShares Expanded and SPDR SP

Can any of the company-specific risk be diversified away by investing in both IShares Expanded 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 Expanded 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 Expanded Tech Software and SPDR SP Semiconductor, you can compare the effects of market volatilities on IShares Expanded 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 Expanded with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Expanded and SPDR SP.

Diversification Opportunities for IShares Expanded and SPDR SP

0.64

Correlation Coefficient

IShares Expanded  SPDR SP

Poor diversification

The 3 months correlation between IShares and SPDR is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding iShares Expanded Tech Software and SPDR SP Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Semiconductor and IShares Expanded 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 Expanded Tech Software 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 Semiconductor has no effect on the direction of IShares Expanded i.e., IShares Expanded and SPDR SP go up and down completely randomly.

Pair Corralation between IShares Expanded and SPDR SP

Considering the 90-day investment horizon iShares Expanded Tech Software is expected to generate 0.7 times more return on investment than SPDR SP. However, iShares Expanded Tech Software is 1.42 times less risky than SPDR SP. It trades about -0.07 of its potential returns per unit of risk. SPDR SP Semiconductor is currently generating about -0.1 per unit of risk. If you would invest  10,228  in iShares Expanded Tech Software on December 27, 2024 and sell it today you would lose (815.00) from holding iShares Expanded Tech Software or give up 7.97% of portfolio value over 90 days.

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

iShares Expanded Tech Software  vs.  SPDR SP Semiconductor

iShares Expanded Tech

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Expanded Tech Software has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Etf's technical and fundamental indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the fund sophisticated investors.

SPDR SP Semiconductor

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR SP Semiconductor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Etf's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the fund shareholders.

Pair Trading with IShares Expanded and SPDR SP

The main advantage of trading using opposite IShares Expanded and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Expanded 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 Expanded Tech Software and SPDR SP Semiconductor 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.