Correlation Between SPDR SP and IShares International

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

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

Diversification Opportunities for SPDR SP and IShares International

0.65

Correlation Coefficient

SPDR SP  IShares International

Poor diversification

The 3 months correlation between SPDR and IShares is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP Dividend and iShares International Select in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares International and SPDR SP 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 SP Dividend are associated (or correlated) with IShares International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares International has no effect on the direction of SPDR SP i.e., SPDR SP and IShares International go up and down completely randomly.

Pair Corralation between SPDR SP and IShares International

Considering the 90-day investment horizon SPDR SP is expected to generate 19.01 times less return on investment than IShares International. In addition to that, SPDR SP is 1.17 times more volatile than iShares International Select. It trades about 0.01 of its total potential returns per unit of risk. iShares International Select is currently generating about 0.31 per unit of volatility. If you would invest  2,724  in iShares International Select on December 24, 2024 and sell it today you would earn a total of  387.00  from holding iShares International Select or generate 14.21% return on investment over 90 days.

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

SPDR SP Dividend  vs.  iShares International Select

SPDR SP Dividend

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP Dividend are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental indicators, SPDR SP is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

iShares International

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares International Select are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal fundamental indicators, IShares International showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SPDR SP and IShares International

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

The idea behind SPDR SP Dividend and iShares International Select 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.