Correlation Between SSGA SPDR and IShares STOXX

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

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

Diversification Opportunities for SSGA SPDR and IShares STOXX

-0.44

Correlation Coefficient

SSGA SPDR  IShares STOXX

Very good diversification

The 3 months correlation between SSGA and IShares is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding SSGA SPDR ETFS and iShares STOXX Europe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares STOXX Europe and SSGA SPDR 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 SSGA SPDR ETFS are associated (or correlated) with IShares STOXX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares STOXX Europe has no effect on the direction of SSGA SPDR i.e., SSGA SPDR and IShares STOXX go up and down completely randomly.

Pair Corralation between SSGA SPDR and IShares STOXX

Assuming the 90 days trading horizon SSGA SPDR ETFS is expected to generate 1.12 times more return on investment than IShares STOXX. However, SSGA SPDR is 1.12 times more volatile than iShares STOXX Europe. It trades about 0.27 of its potential returns per unit of risk. iShares STOXX Europe is currently generating about 0.28 per unit of risk. If you would invest  3,737  in SSGA SPDR ETFS on September 17, 2024 and sell it today you would earn a total of  115.00  from holding SSGA SPDR ETFS or generate 3.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

SSGA SPDR ETFS  vs.  iShares STOXX Europe

SSGA SPDR ETFS

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SSGA SPDR ETFS are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, SSGA SPDR may actually be approaching a critical reversion point that can send shares even higher in January 2025.

iShares STOXX Europe

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares STOXX Europe has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, IShares STOXX 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 SSGA SPDR and IShares STOXX

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

The idea behind SSGA SPDR ETFS and iShares STOXX Europe 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.