Correlation Between IShares VII and SPDR SP

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

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

Diversification Opportunities for IShares VII and SPDR SP

-0.14

Correlation Coefficient

IShares VII  SPDR SP

Good diversification

The 3 months correlation between IShares and SPDR is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding iShares VII PLC and SPDR SP Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Materials and IShares VII 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 iShares VII PLC 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 Materials has no effect on the direction of IShares VII i.e., IShares VII and SPDR SP go up and down completely randomly.

Pair Corralation between IShares VII and SPDR SP

Assuming the 90 days trading horizon iShares VII PLC is expected to generate 1.15 times more return on investment than SPDR SP. However, IShares VII is 1.15 times more volatile than SPDR SP Materials. It trades about 0.06 of its potential returns per unit of risk. SPDR SP Materials is currently generating about 0.03 per unit of risk. If you would invest  18,558  in iShares VII PLC on October 10, 2024 and sell it today you would earn a total of  5,917  from holding iShares VII PLC or generate 31.88% return on investment over 90 days.

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

iShares VII PLC  vs.  SPDR SP Materials

iShares VII PLC

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares VII PLC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, IShares VII is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

SPDR SP Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR SP Materials has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Etf's fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the Exchange Traded Fund stockholders.

Pair Trading with IShares VII and SPDR SP

The main advantage of trading using opposite IShares VII and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares VII 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 iShares VII PLC and SPDR SP Materials 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.