Correlation Between SPDR SP and IShares Morningstar

Can any of the company-specific risk be diversified away by investing in both SPDR SP and IShares Morningstar 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 Morningstar 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 Morningstar Mid Cap, you can compare the effects of market volatilities on SPDR SP and IShares Morningstar 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 Morningstar. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and IShares Morningstar.

Diversification Opportunities for SPDR SP and IShares Morningstar

0.76

Correlation Coefficient

SPDR SP  IShares Morningstar

Poor diversification

The 3 months correlation between SPDR and IShares is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP Dividend and iShares Morningstar Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Morningstar Mid 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 Morningstar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Morningstar Mid has no effect on the direction of SPDR SP i.e., SPDR SP and IShares Morningstar go up and down completely randomly.

Pair Corralation between SPDR SP and IShares Morningstar

Considering the 90-day investment horizon SPDR SP is expected to generate 1.9 times less return on investment than IShares Morningstar. But when comparing it to its historical volatility, SPDR SP Dividend is 1.37 times less risky than IShares Morningstar. It trades about 0.22 of its potential returns per unit of risk. iShares Morningstar Mid Cap is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest  7,568  in iShares Morningstar Mid Cap on September 5, 2024 and sell it today you would earn a total of  419.00  from holding iShares Morningstar Mid Cap or generate 5.54% 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 Morningstar Mid Cap

SPDR SP Dividend

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP Dividend are ranked lower than 7 (%) 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 Morningstar Mid

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Morningstar Mid Cap are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, IShares Morningstar may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with SPDR SP and IShares Morningstar

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

The idea behind SPDR SP Dividend and iShares Morningstar Mid Cap 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.