Correlation Between IShares Core and SPDR SPASX

Can any of the company-specific risk be diversified away by investing in both IShares Core 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 Core 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 Core SP and SPDR SPASX 200, you can compare the effects of market volatilities on IShares Core 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 Core with a short position of SPDR SPASX. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and SPDR SPASX.

Diversification Opportunities for IShares Core and SPDR SPASX

0.59

Correlation Coefficient

IShares Core  SPDR SPASX

Very weak diversification

The 3 months correlation between IShares and SPDR is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SP and SPDR SPASX 200 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SPASX 200 and IShares Core 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 Core SP 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 200 has no effect on the direction of IShares Core i.e., IShares Core and SPDR SPASX go up and down completely randomly.

Pair Corralation between IShares Core and SPDR SPASX

Assuming the 90 days trading horizon iShares Core SP is expected to generate 0.56 times more return on investment than SPDR SPASX. However, iShares Core SP is 1.79 times less risky than SPDR SPASX. It trades about -0.06 of its potential returns per unit of risk. SPDR SPASX 200 is currently generating about -0.12 per unit of risk. If you would invest  6,440  in iShares Core SP on December 4, 2024 and sell it today you would lose (50.00) from holding iShares Core SP or give up 0.78% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

iShares Core SP  vs.  SPDR SPASX 200

iShares Core SP

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core SP are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, IShares Core is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

SPDR SPASX 200

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR SPASX 200 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental 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 Core and SPDR SPASX

The main advantage of trading using opposite IShares Core and SPDR SPASX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Core 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 Core SP and SPDR SPASX 200 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.