Correlation Between SPDR SSgA and SPDR MSCI

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

Diversification Opportunities for SPDR SSgA and SPDR MSCI

0.18

Correlation Coefficient

SPDR SSgA  SPDR MSCI

Average diversification

The 3 months correlation between SPDR and SPDR is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SSgA Income and SPDR MSCI Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR MSCI Emerging and SPDR SSgA 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 SSgA Income 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 Emerging has no effect on the direction of SPDR SSgA i.e., SPDR SSgA and SPDR MSCI go up and down completely randomly.

Pair Corralation between SPDR SSgA and SPDR MSCI

Given the investment horizon of 90 days SPDR SSgA is expected to generate 1.17 times less return on investment than SPDR MSCI. But when comparing it to its historical volatility, SPDR SSgA Income is 1.65 times less risky than SPDR MSCI. It trades about 0.07 of its potential returns per unit of risk. SPDR MSCI Emerging is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  5,023  in SPDR MSCI Emerging on September 19, 2024 and sell it today you would earn a total of  983.00  from holding SPDR MSCI Emerging or generate 19.57% return on investment over 90 days.

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

SPDR SSgA Income  vs.  SPDR MSCI Emerging

SPDR SSgA Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR SSgA Income has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward-looking signals, SPDR SSgA is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

SPDR MSCI Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR MSCI Emerging has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, SPDR MSCI is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with SPDR SSgA and SPDR MSCI

The main advantage of trading using opposite SPDR SSgA and SPDR MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SSgA 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 SSgA Income and SPDR MSCI Emerging 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.