Correlation Between SPDR FactSet and IShares Expanded

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

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

Diversification Opportunities for SPDR FactSet and IShares Expanded

0.91

Correlation Coefficient

SPDR FactSet  IShares Expanded

Almost no diversification

The 3 months correlation between SPDR and IShares is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding SPDR FactSet Innovative and iShares Expanded Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Expanded Tech and SPDR FactSet 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 FactSet Innovative are associated (or correlated) with IShares Expanded. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Expanded Tech has no effect on the direction of SPDR FactSet i.e., SPDR FactSet and IShares Expanded go up and down completely randomly.

Pair Corralation between SPDR FactSet and IShares Expanded

Given the investment horizon of 90 days SPDR FactSet is expected to generate 1.37 times less return on investment than IShares Expanded. In addition to that, SPDR FactSet is 1.25 times more volatile than iShares Expanded Tech. It trades about 0.07 of its total potential returns per unit of risk. iShares Expanded Tech is currently generating about 0.11 per unit of volatility. If you would invest  5,099  in iShares Expanded Tech on October 15, 2024 and sell it today you would earn a total of  5,044  from holding iShares Expanded Tech or generate 98.92% return on investment over 90 days.

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

SPDR FactSet Innovative  vs.  iShares Expanded Tech

SPDR FactSet Innovative

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR FactSet Innovative are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, SPDR FactSet may actually be approaching a critical reversion point that can send shares even higher in February 2025.

iShares Expanded Tech

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Expanded Tech are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, IShares Expanded is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with SPDR FactSet and IShares Expanded

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

The idea behind SPDR FactSet Innovative and iShares Expanded Tech 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.