Correlation Between SPDR MSCI and SPDR MSCI

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

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

Diversification Opportunities for SPDR MSCI and SPDR MSCI

0.41

Correlation Coefficient

SPDR MSCI  SPDR MSCI

Very weak diversification

The 3 months correlation between SPDR and SPDR is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding SPDR MSCI Europe and SPDR MSCI EM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR MSCI EM and SPDR MSCI 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 MSCI Europe are associated (or correlated) with SPDR MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR MSCI EM has no effect on the direction of SPDR MSCI i.e., SPDR MSCI and SPDR MSCI go up and down completely randomly.

Pair Corralation between SPDR MSCI and SPDR MSCI

Assuming the 90 days trading horizon SPDR MSCI is expected to generate 1.38 times less return on investment than SPDR MSCI. But when comparing it to its historical volatility, SPDR MSCI Europe is 2.34 times less risky than SPDR MSCI. It trades about 0.27 of its potential returns per unit of risk. SPDR MSCI EM is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  6,874  in SPDR MSCI EM on September 15, 2024 and sell it today you would earn a total of  189.00  from holding SPDR MSCI EM or generate 2.75% return on investment over 90 days.

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

SPDR MSCI Europe  vs.  SPDR MSCI EM

SPDR MSCI Europe

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR MSCI Europe are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, SPDR MSCI is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

SPDR MSCI EM

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR MSCI EM are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, SPDR MSCI may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with SPDR MSCI and SPDR MSCI

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

The idea behind SPDR MSCI Europe and SPDR MSCI EM 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.