Correlation Between SPDR SP and IShares AsiaPacific

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

By analyzing existing cross correlation between SPDR SP Emerging and iShares AsiaPacific Dividend, you can compare the effects of market volatilities on SPDR SP and IShares AsiaPacific 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 AsiaPacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and IShares AsiaPacific.

Diversification Opportunities for SPDR SP and IShares AsiaPacific

0.95

Correlation Coefficient

SPDR SP  IShares AsiaPacific

Almost no diversification

The 3 months correlation between SPDR and IShares is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP Emerging and iShares AsiaPacific Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares AsiaPacific 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 Emerging are associated (or correlated) with IShares AsiaPacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares AsiaPacific has no effect on the direction of SPDR SP i.e., SPDR SP and IShares AsiaPacific go up and down completely randomly.

Pair Corralation between SPDR SP and IShares AsiaPacific

Considering the 90-day investment horizon SPDR SP is expected to generate 1.31 times less return on investment than IShares AsiaPacific. In addition to that, SPDR SP is 1.01 times more volatile than iShares AsiaPacific Dividend. It trades about 0.08 of its total potential returns per unit of risk. iShares AsiaPacific Dividend is currently generating about 0.1 per unit of volatility. If you would invest  3,036  in iShares AsiaPacific Dividend on February 24, 2024 and sell it today you would earn a total of  732.00  from holding iShares AsiaPacific Dividend or generate 24.11% return on investment over 90 days.

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

SPDR SP Emerging  vs.  iShares AsiaPacific Dividend

SPDR SP Emerging

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP Emerging are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain primary indicators, SPDR SP may actually be approaching a critical reversion point that can send shares even higher in June 2024.

iShares AsiaPacific

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares AsiaPacific Dividend are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, IShares AsiaPacific is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with SPDR SP and IShares AsiaPacific

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

The idea behind SPDR SP Emerging and iShares AsiaPacific Dividend 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.