Correlation Between SPDR FTSE and IShares Core

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

By analyzing existing cross correlation between SPDR FTSE International and iShares Core 1 5, you can compare the effects of market volatilities on SPDR FTSE and IShares Core 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 FTSE with a short position of IShares Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR FTSE and IShares Core.

Diversification Opportunities for SPDR FTSE and IShares Core

0.92

Correlation Coefficient

SPDR FTSE  IShares Core

Almost no diversification

The 3 months correlation between SPDR and IShares is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding SPDR FTSE International and iShares Core 1 5 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core 1 and SPDR FTSE 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 FTSE International are associated (or correlated) with IShares Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Core 1 has no effect on the direction of SPDR FTSE i.e., SPDR FTSE and IShares Core go up and down completely randomly.

Pair Corralation between SPDR FTSE and IShares Core

Considering the 90-day investment horizon SPDR FTSE International is expected to generate 5.32 times more return on investment than IShares Core. However, SPDR FTSE is 5.32 times more volatile than iShares Core 1 5. It trades about 0.11 of its potential returns per unit of risk. iShares Core 1 5 is currently generating about 0.24 per unit of risk. If you would invest  3,599  in SPDR FTSE International on December 28, 2024 and sell it today you would earn a total of  144.00  from holding SPDR FTSE International or generate 4.0% return on investment over 90 days.

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

SPDR FTSE International  vs.  iShares Core 1 5

SPDR FTSE International

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR FTSE International are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable forward indicators, SPDR FTSE is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

iShares Core 1

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core 1 5 are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, IShares Core is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with SPDR FTSE and IShares Core

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

The idea behind SPDR FTSE International and iShares Core 1 5 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.