Correlation Between SPDR Morgan and IShares Global

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

Diversification Opportunities for SPDR Morgan and IShares Global

0.87

Correlation Coefficient

SPDR Morgan  IShares Global

Very poor diversification

The 3 months correlation between SPDR and IShares is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Morgan Stanley and iShares Global Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Global 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 Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Global Tech has no effect on the direction of SPDR Morgan i.e., SPDR Morgan and IShares Global go up and down completely randomly.

Pair Corralation between SPDR Morgan and IShares Global

Given the investment horizon of 90 days SPDR Morgan Stanley is expected to generate 1.1 times more return on investment than IShares Global. However, SPDR Morgan is 1.1 times more volatile than iShares Global Tech. It trades about 0.1 of its potential returns per unit of risk. iShares Global Tech is currently generating about 0.09 per unit of risk. If you would invest  10,967  in SPDR Morgan Stanley on October 15, 2024 and sell it today you would earn a total of  9,171  from holding SPDR Morgan Stanley or generate 83.62% 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 Global Tech

SPDR Morgan Stanley

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Morgan Stanley are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, SPDR Morgan is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

iShares Global Tech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Global Tech has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, IShares Global is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with SPDR Morgan and IShares Global

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

The idea behind SPDR Morgan Stanley and iShares Global 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.

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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.