Correlation Between SPDR Morgan and IShares Evolved

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

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

Diversification Opportunities for SPDR Morgan and IShares Evolved

0.88

Correlation Coefficient

SPDR Morgan  IShares Evolved

Very poor diversification

The 3 months correlation between SPDR and IShares is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Morgan Stanley and iShares Evolved Discretionary in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Evolved Disc and SPDR Morgan 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 Morgan Stanley are associated (or correlated) with IShares Evolved. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Evolved Disc has no effect on the direction of SPDR Morgan i.e., SPDR Morgan and IShares Evolved go up and down completely randomly.

Pair Corralation between SPDR Morgan and IShares Evolved

Given the investment horizon of 90 days SPDR Morgan Stanley is expected to generate 1.5 times more return on investment than IShares Evolved. However, SPDR Morgan is 1.5 times more volatile than iShares Evolved Discretionary. It trades about 0.08 of its potential returns per unit of risk. iShares Evolved Discretionary is currently generating about -0.08 per unit of risk. If you would invest  20,580  in SPDR Morgan Stanley on September 27, 2024 and sell it today you would earn a total of  427.00  from holding SPDR Morgan Stanley or generate 2.07% return on investment over 90 days.

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

SPDR Morgan Stanley  vs.  iShares Evolved Discretionary

SPDR Morgan Stanley

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Morgan Stanley are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, SPDR Morgan may actually be approaching a critical reversion point that can send shares even higher in January 2025.

iShares Evolved Disc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Evolved Discretionary are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental indicators, IShares Evolved is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with SPDR Morgan and IShares Evolved

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

The idea behind SPDR Morgan Stanley and iShares Evolved Discretionary 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.