Correlation Between SPDR Morgan and IShares Expanded

Can any of the company-specific risk be diversified away by investing in both SPDR Morgan 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 Morgan 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 Morgan Stanley and iShares Expanded Tech, you can compare the effects of market volatilities on SPDR Morgan 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 Morgan with a short position of IShares Expanded. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Morgan and IShares Expanded.

Diversification Opportunities for SPDR Morgan and IShares Expanded

0.97

Correlation Coefficient

SPDR Morgan  IShares Expanded

Almost no diversification

The 3 months correlation between SPDR and IShares is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Morgan Stanley 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 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 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 Morgan i.e., SPDR Morgan and IShares Expanded go up and down completely randomly.

Pair Corralation between SPDR Morgan and IShares Expanded

Given the investment horizon of 90 days SPDR Morgan is expected to generate 1.84 times less return on investment than IShares Expanded. But when comparing it to its historical volatility, SPDR Morgan Stanley is 1.01 times less risky than IShares Expanded. It trades about 0.08 of its potential returns per unit of risk. iShares Expanded Tech is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  10,148  in iShares Expanded Tech on September 27, 2024 and sell it today you would earn a total of  423.00  from holding iShares Expanded Tech or generate 4.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.45%
Values	Daily Returns

SPDR Morgan Stanley  vs.  iShares Expanded Tech

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 Expanded Tech

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Expanded Tech are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, IShares Expanded may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with SPDR Morgan and IShares Expanded

The main advantage of trading using opposite SPDR Morgan and IShares Expanded positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR Morgan 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 Morgan Stanley 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.