Correlation Between SPDR SP and IShares MSCI

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

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

Diversification Opportunities for SPDR SP and IShares MSCI

-0.36

Correlation Coefficient

SPDR SP  IShares MSCI

Very good diversification

The 3 months correlation between SPDR and IShares is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP Oil and iShares MSCI Netherlands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI Netherlands and SPDR SP 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 SP Oil are associated (or correlated) with IShares MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares MSCI Netherlands has no effect on the direction of SPDR SP i.e., SPDR SP and IShares MSCI go up and down completely randomly.

Pair Corralation between SPDR SP and IShares MSCI

Considering the 90-day investment horizon SPDR SP Oil is expected to under-perform the IShares MSCI. In addition to that, SPDR SP is 1.79 times more volatile than iShares MSCI Netherlands. It trades about -0.07 of its total potential returns per unit of risk. iShares MSCI Netherlands is currently generating about -0.13 per unit of volatility. If you would invest  4,697  in iShares MSCI Netherlands on September 23, 2024 and sell it today you would lose (224.00) from holding iShares MSCI Netherlands or give up 4.77% of portfolio value over 90 days.

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

SPDR SP Oil  vs.  iShares MSCI Netherlands

SPDR SP Oil

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR SP Oil has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, SPDR SP is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

iShares MSCI Netherlands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares MSCI Netherlands has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Etf's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

Pair Trading with SPDR SP and IShares MSCI

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

The idea behind SPDR SP Oil and iShares MSCI Netherlands 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.