Correlation Between SPDR MSCI and Investment Managers

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

By analyzing existing cross correlation between SPDR MSCI EAFE and Investment Managers Series, you can compare the effects of market volatilities on SPDR MSCI and Investment Managers 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 Investment Managers. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR MSCI and Investment Managers.

Diversification Opportunities for SPDR MSCI and Investment Managers

-0.19

Correlation Coefficient

SPDR MSCI  Investment Managers

Good diversification

The 3 months correlation between SPDR and Investment is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding SPDR MSCI EAFE and Investment Managers Series in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investment Managers 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 EAFE are associated (or correlated) with Investment Managers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investment Managers has no effect on the direction of SPDR MSCI i.e., SPDR MSCI and Investment Managers go up and down completely randomly.

Pair Corralation between SPDR MSCI and Investment Managers

Given the investment horizon of 90 days SPDR MSCI EAFE is expected to generate 0.66 times more return on investment than Investment Managers. However, SPDR MSCI EAFE is 1.51 times less risky than Investment Managers. It trades about 0.18 of its potential returns per unit of risk. Investment Managers Series is currently generating about 0.01 per unit of risk. If you would invest  7,260  in SPDR MSCI EAFE on December 29, 2024 and sell it today you would earn a total of  698.00  from holding SPDR MSCI EAFE or generate 9.61% return on investment over 90 days.

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

SPDR MSCI EAFE  vs.  Investment Managers Series

SPDR MSCI EAFE

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR MSCI EAFE are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating technical and fundamental indicators, SPDR MSCI may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Investment Managers

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Investment Managers Series are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Investment Managers is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with SPDR MSCI and Investment Managers

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

The idea behind SPDR MSCI EAFE and Investment Managers Series 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.