Correlation Between IShares SP and IShares STOXX
Can any of the company-specific risk be diversified away by investing in both IShares SP and IShares STOXX 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 SP and IShares STOXX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares SP 500 and iShares STOXX Europe, you can compare the effects of market volatilities on IShares SP and IShares STOXX 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 SP with a short position of IShares STOXX. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares SP and IShares STOXX.
Diversification Opportunities for IShares SP and IShares STOXX
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between IShares and IShares is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding iShares SP 500 and iShares STOXX Europe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares STOXX Europe and IShares SP 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 SP 500 are associated (or correlated) with IShares STOXX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares STOXX Europe has no effect on the direction of IShares SP i.e., IShares SP and IShares STOXX go up and down completely randomly.
Pair Corralation between IShares SP and IShares STOXX
Assuming the 90 days trading horizon iShares SP 500 is expected to under-perform the IShares STOXX. In addition to that, IShares SP is 1.5 times more volatile than iShares STOXX Europe. It trades about -0.13 of its total potential returns per unit of risk. iShares STOXX Europe is currently generating about 0.29 per unit of volatility. If you would invest 4,435 in iShares STOXX Europe on December 5, 2024 and sell it today you would earn a total of 368.00 from holding iShares STOXX Europe or generate 8.3% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
iShares SP 500 vs. iShares STOXX Europe
Performance |
Timeline |
iShares SP 500 |
iShares STOXX Europe |
IShares SP and IShares STOXX Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with IShares SP and IShares STOXX
The main advantage of trading using opposite IShares SP and IShares STOXX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares SP position performs unexpectedly, IShares STOXX 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 IShares STOXX will offset losses from the drop in IShares STOXX's long position.IShares SP vs. iShares MSCI EM | IShares SP vs. iShares III Public | IShares SP vs. iShares Core MSCI | IShares SP vs. iShares France Govt |
IShares STOXX vs. iShares MSCI EM | IShares STOXX vs. iShares III Public | IShares STOXX vs. iShares Core MSCI | IShares STOXX vs. iShares France Govt |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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