Correlation Between IShares Technology and SPDR FactSet

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

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

Diversification Opportunities for IShares Technology and SPDR FactSet

0.82

Correlation Coefficient

IShares Technology  SPDR FactSet

Very poor diversification

The 3 months correlation between IShares and SPDR is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding iShares Technology ETF and SPDR FactSet Innovative in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR FactSet Innovative and IShares Technology 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 Technology ETF are associated (or correlated) with SPDR FactSet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR FactSet Innovative has no effect on the direction of IShares Technology i.e., IShares Technology and SPDR FactSet go up and down completely randomly.

Pair Corralation between IShares Technology and SPDR FactSet

Considering the 90-day investment horizon iShares Technology ETF is expected to under-perform the SPDR FactSet. In addition to that, IShares Technology is 1.03 times more volatile than SPDR FactSet Innovative. It trades about -0.08 of its total potential returns per unit of risk. SPDR FactSet Innovative is currently generating about -0.04 per unit of volatility. If you would invest  17,459  in SPDR FactSet Innovative on December 28, 2024 and sell it today you would lose (764.00) from holding SPDR FactSet Innovative or give up 4.38% of portfolio value over 90 days.

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

iShares Technology ETF  vs.  SPDR FactSet Innovative

iShares Technology ETF

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Technology ETF has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Etf's basic 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 FactSet Innovative

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR FactSet Innovative has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, SPDR FactSet is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with IShares Technology and SPDR FactSet

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

The idea behind iShares Technology ETF and SPDR FactSet Innovative 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.