Correlation Between IShares Global and SPDR SP

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

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

Diversification Opportunities for IShares Global and SPDR SP

0.07

Correlation Coefficient

IShares Global  SPDR SP

Significant diversification

The 3 months correlation between IShares and SPDR is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding iShares Global Materials and SPDR SP Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Global and IShares Global 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 Global Materials are associated (or correlated) with SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP Global has no effect on the direction of IShares Global i.e., IShares Global and SPDR SP go up and down completely randomly.

Pair Corralation between IShares Global and SPDR SP

Considering the 90-day investment horizon iShares Global Materials is expected to under-perform the SPDR SP. In addition to that, IShares Global is 1.33 times more volatile than SPDR SP Global. It trades about -0.08 of its total potential returns per unit of risk. SPDR SP Global is currently generating about 0.0 per unit of volatility. If you would invest  6,101  in SPDR SP Global on September 14, 2024 and sell it today you would lose (7.00) from holding SPDR SP Global or give up 0.11% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

iShares Global Materials  vs.  SPDR SP Global

iShares Global Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Global Materials has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, IShares Global is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

SPDR SP Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR SP Global has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward indicators, SPDR SP is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with IShares Global and SPDR SP

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

The idea behind iShares Global Materials and SPDR SP Global 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 Stocks Directory module to find actively traded stocks across global markets.