Correlation Between IShares CoreSP and SPDR SPASX

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

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

Diversification Opportunities for IShares CoreSP and SPDR SPASX

-0.76

Correlation Coefficient

IShares CoreSP  SPDR SPASX

Pay attention - limited upside

The 3 months correlation between IShares and SPDR is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding iShares CoreSP MidCap and SPDR SPASX Australian in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SPASX Australian and IShares CoreSP 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 CoreSP MidCap are associated (or correlated) with SPDR SPASX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SPASX Australian has no effect on the direction of IShares CoreSP i.e., IShares CoreSP and SPDR SPASX go up and down completely randomly.

Pair Corralation between IShares CoreSP and SPDR SPASX

Assuming the 90 days trading horizon iShares CoreSP MidCap is expected to generate 3.35 times more return on investment than SPDR SPASX. However, IShares CoreSP is 3.35 times more volatile than SPDR SPASX Australian. It trades about 0.21 of its potential returns per unit of risk. SPDR SPASX Australian is currently generating about -0.04 per unit of risk. If you would invest  4,563  in iShares CoreSP MidCap on September 3, 2024 and sell it today you would earn a total of  635.00  from holding iShares CoreSP MidCap or generate 13.92% return on investment over 90 days.

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

iShares CoreSP MidCap  vs.  SPDR SPASX Australian

iShares CoreSP MidCap

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares CoreSP MidCap are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical indicators, IShares CoreSP unveiled solid returns over the last few months and may actually be approaching a breakup point.

SPDR SPASX Australian

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with IShares CoreSP and SPDR SPASX

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

The idea behind iShares CoreSP MidCap and SPDR SPASX Australian 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.