Correlation Between SPDR MSCI and SPDR SP

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

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

Diversification Opportunities for SPDR MSCI and SPDR SP

0.31

Correlation Coefficient

SPDR MSCI  SPDR SP

Weak diversification

The 3 months correlation between SPDR and SPDR is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding SPDR MSCI Europe and SPDR SP Consumer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Consumer 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 Europe are associated (or correlated) with SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP Consumer has no effect on the direction of SPDR MSCI i.e., SPDR MSCI and SPDR SP go up and down completely randomly.

Pair Corralation between SPDR MSCI and SPDR SP

Assuming the 90 days trading horizon SPDR MSCI Europe is expected to under-perform the SPDR SP. In addition to that, SPDR MSCI is 1.02 times more volatile than SPDR SP Consumer. It trades about -0.01 of its total potential returns per unit of risk. SPDR SP Consumer is currently generating about 0.04 per unit of volatility. If you would invest  4,216  in SPDR SP Consumer on September 5, 2024 and sell it today you would earn a total of  63.00  from holding SPDR SP Consumer or generate 1.49% return on investment over 90 days.

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

SPDR MSCI Europe  vs.  SPDR SP Consumer

SPDR MSCI Europe

Risk-Adjusted Performance

0 of 100

Very Weak

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

SPDR SP Consumer

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP Consumer are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, SPDR SP is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with SPDR MSCI and SPDR SP

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

The idea behind SPDR MSCI Europe and SPDR SP Consumer 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.

Check out your portfolio center.

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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.