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 Technology, 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

0.57

Correlation Coefficient

IShares VII  SPDR SP

Very weak diversification

The 3 months correlation between IShares and SPDR is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding iShares VII PLC and SPDR SP Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Technology 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 Technology 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 is expected to generate 2.11 times less return on investment than SPDR SP. In addition to that, IShares VII is 1.03 times more volatile than SPDR SP Technology. It trades about 0.09 of its total potential returns per unit of risk. SPDR SP Technology is currently generating about 0.2 per unit of volatility. If you would invest  10,410  in SPDR SP Technology on September 13, 2024 and sell it today you would earn a total of  1,480  from holding SPDR SP Technology or generate 14.22% return on investment over 90 days.

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

iShares VII PLC  vs.  SPDR SP Technology

iShares VII PLC

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares VII PLC are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, IShares VII may actually be approaching a critical reversion point that can send shares even higher in January 2025.

SPDR SP Technology

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP Technology are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, SPDR SP exhibited solid returns over the last few months and may actually be approaching a breakup point.

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 Technology 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 Commodity Directory module to find actively traded commodities issued by global exchanges.