Correlation Between SPDR Portfolio and IShares Russell

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

By analyzing existing cross correlation between SPDR Portfolio SP and iShares Russell 2500, you can compare the effects of market volatilities on SPDR Portfolio and IShares Russell 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 Portfolio with a short position of IShares Russell. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Portfolio and IShares Russell.

Diversification Opportunities for SPDR Portfolio and IShares Russell

0.79

Correlation Coefficient

SPDR Portfolio  IShares Russell

Poor diversification

The 3 months correlation between SPDR and IShares is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Portfolio SP and iShares Russell 2500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Russell 2500 and SPDR Portfolio 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 Portfolio SP are associated (or correlated) with IShares Russell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Russell 2500 has no effect on the direction of SPDR Portfolio i.e., SPDR Portfolio and IShares Russell go up and down completely randomly.

Pair Corralation between SPDR Portfolio and IShares Russell

Given the investment horizon of 90 days SPDR Portfolio is expected to generate 3.42 times less return on investment than IShares Russell. In addition to that, SPDR Portfolio is 1.12 times more volatile than iShares Russell 2500. It trades about 0.01 of its total potential returns per unit of risk. iShares Russell 2500 is currently generating about 0.02 per unit of volatility. If you would invest  6,050  in iShares Russell 2500 on January 26, 2024 and sell it today you would earn a total of  64.00  from holding iShares Russell 2500 or generate 1.06% return on investment over 90 days.

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

SPDR Portfolio SP  vs.  iShares Russell 2500

SPDR Portfolio SP

Risk-Adjusted Performance

0 of 100

Very Weak

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

iShares Russell 2500

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Russell 2500 are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound primary indicators, IShares Russell is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with SPDR Portfolio and IShares Russell

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

The idea behind SPDR Portfolio SP and iShares Russell 2500 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.