Correlation Between IShares Core and SPDR SP
Can any of the company-specific risk be diversified away by investing in both IShares Core and SPDR SP 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 IShares Core and SPDR SP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Core SP and SPDR SP 500, you can compare the effects of market volatilities on IShares Core and SPDR SP 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 IShares Core with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and SPDR SP.
Diversification Opportunities for IShares Core and SPDR SP
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and SPDR is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SP and SPDR SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP 500 and IShares Core 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 iShares Core SP are associated (or correlated) with SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP 500 has no effect on the direction of IShares Core i.e., IShares Core and SPDR SP go up and down completely randomly.
Pair Corralation between IShares Core and SPDR SP
Considering the 90-day investment horizon iShares Core SP is expected to generate 1.43 times more return on investment than SPDR SP. However, IShares Core is 1.43 times more volatile than SPDR SP 500. It trades about 0.19 of its potential returns per unit of risk. SPDR SP 500 is currently generating about 0.25 per unit of risk. If you would invest 4,608 in iShares Core SP on January 25, 2024 and sell it today you would earn a total of 1,177 from holding iShares Core SP or generate 25.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Core SP vs. SPDR SP 500
Performance |
| Timeline |
| iShares Core SP |
| SPDR SP 500 |
IShares Core and SPDR SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Core and SPDR SP
The main advantage of trading using opposite IShares Core and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Core position performs unexpectedly, SPDR SP 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 SPDR SP will offset losses from the drop in SPDR SP's long position.| IShares Core vs. SPDR Russell 1000 | IShares Core vs. SPDR MSCI USA | IShares Core vs. SPDR MSCI EAFE | IShares Core vs. SPDR SSGA Large |
| SPDR SP vs. SPDR MSCI EAFE | SPDR SP vs. SPDR MSCI Emerging | SPDR SP vs. SPDR Russell 1000 | SPDR SP vs. SPDR Russell 1000 |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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