Correlation Between SPDR Portfolio and SPDR MSCI

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

By analyzing existing cross correlation between SPDR Portfolio Corporate and SPDR MSCI USA, you can compare the effects of market volatilities on SPDR Portfolio and SPDR MSCI 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 Portfolio with a short position of SPDR MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Portfolio and SPDR MSCI.

Diversification Opportunities for SPDR Portfolio and SPDR MSCI

-0.31

Correlation Coefficient

SPDR Portfolio  SPDR MSCI

Very good 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 Portfolio Corporate and SPDR MSCI USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR MSCI USA and SPDR Portfolio 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 Portfolio Corporate are associated (or correlated) with SPDR MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR MSCI USA has no effect on the direction of SPDR Portfolio i.e., SPDR Portfolio and SPDR MSCI go up and down completely randomly.

Pair Corralation between SPDR Portfolio and SPDR MSCI

Given the investment horizon of 90 days SPDR Portfolio Corporate is expected to under-perform the SPDR MSCI. But the etf apears to be less risky and, when comparing its historical volatility, SPDR Portfolio Corporate is 1.61 times less risky than SPDR MSCI. The etf trades about -0.1 of its potential returns per unit of risk. The SPDR MSCI USA is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  15,557  in SPDR MSCI USA on September 17, 2024 and sell it today you would earn a total of  522.00  from holding SPDR MSCI USA or generate 3.36% return on investment over 90 days.

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

SPDR Portfolio Corporate  vs.  SPDR MSCI USA

SPDR Portfolio Corporate

Risk-Adjusted Performance

0 of 100

Very Weak

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

SPDR MSCI USA

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR MSCI USA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, SPDR MSCI is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with SPDR Portfolio and SPDR MSCI

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

The idea behind SPDR Portfolio Corporate and SPDR MSCI USA 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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.