Correlation Between IShares Global and SPDR Portfolio

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

By analyzing existing cross correlation between iShares Global REIT and SPDR Portfolio Emerging, you can compare the effects of market volatilities on IShares Global and SPDR Portfolio 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 Portfolio. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Global and SPDR Portfolio.

Diversification Opportunities for IShares Global and SPDR Portfolio

0.57

Correlation Coefficient

IShares Global  SPDR Portfolio

Very weak diversification

The 3 months correlation between IShares and SPDR is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding iShares Global REIT and SPDR Portfolio Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Portfolio Emerging 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 REIT are associated (or correlated) with SPDR Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Portfolio Emerging has no effect on the direction of IShares Global i.e., IShares Global and SPDR Portfolio go up and down completely randomly.

Pair Corralation between IShares Global and SPDR Portfolio

Given the investment horizon of 90 days IShares Global is expected to generate 1.19 times less return on investment than SPDR Portfolio. But when comparing it to its historical volatility, iShares Global REIT is 1.04 times less risky than SPDR Portfolio. It trades about 0.04 of its potential returns per unit of risk. SPDR Portfolio Emerging is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  3,515  in SPDR Portfolio Emerging on December 5, 2024 and sell it today you would earn a total of  371.00  from holding SPDR Portfolio Emerging or generate 10.55% return on investment over 90 days.

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

iShares Global REIT  vs.  SPDR Portfolio Emerging

iShares Global REIT

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Global REIT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, IShares Global is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

SPDR Portfolio Emerging

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR Portfolio Emerging has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, SPDR Portfolio is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with IShares Global and SPDR Portfolio

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

The idea behind iShares Global REIT and SPDR Portfolio Emerging 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.