Correlation Between SPDR MSCI and IShares ESG

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

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

Diversification Opportunities for SPDR MSCI and IShares ESG

-0.48

Correlation Coefficient

SPDR MSCI  IShares ESG

Very good diversification

The 3 months correlation between SPDR and IShares is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding SPDR MSCI USA and iShares ESG Aware in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares ESG Aware and SPDR MSCI 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 MSCI USA are associated (or correlated) with IShares ESG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares ESG Aware has no effect on the direction of SPDR MSCI i.e., SPDR MSCI and IShares ESG go up and down completely randomly.

Pair Corralation between SPDR MSCI and IShares ESG

Given the investment horizon of 90 days SPDR MSCI USA is expected to under-perform the IShares ESG. In addition to that, SPDR MSCI is 1.31 times more volatile than iShares ESG Aware. It trades about -0.11 of its total potential returns per unit of risk. iShares ESG Aware is currently generating about 0.23 per unit of volatility. If you would invest  7,565  in iShares ESG Aware on December 19, 2024 and sell it today you would earn a total of  890.00  from holding iShares ESG Aware or generate 11.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

SPDR MSCI USA  vs.  iShares ESG Aware

SPDR MSCI USA

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR MSCI USA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Etf's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

iShares ESG Aware

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares ESG Aware are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, IShares ESG may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with SPDR MSCI and IShares ESG

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

The idea behind SPDR MSCI USA and iShares ESG Aware 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.