Correlation Between SPDR Dow and IShares Core

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

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

Diversification Opportunities for SPDR Dow and IShares Core

-0.42

Correlation Coefficient

SPDR Dow  IShares Core

Very good diversification

The 3 months correlation between SPDR and IShares is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Dow Jones and iShares Core MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core MSCI and SPDR Dow 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 Dow Jones are associated (or correlated) with IShares Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Core MSCI has no effect on the direction of SPDR Dow i.e., SPDR Dow and IShares Core go up and down completely randomly.

Pair Corralation between SPDR Dow and IShares Core

Assuming the 90 days trading horizon SPDR Dow is expected to generate 1.02 times less return on investment than IShares Core. In addition to that, SPDR Dow is 2.05 times more volatile than iShares Core MSCI. It trades about 0.02 of its total potential returns per unit of risk. iShares Core MSCI is currently generating about 0.05 per unit of volatility. If you would invest  2,874  in iShares Core MSCI on September 14, 2024 and sell it today you would earn a total of  650.00  from holding iShares Core MSCI or generate 22.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	81.05%
Values	Daily Returns

SPDR Dow Jones  vs.  iShares Core MSCI

SPDR Dow Jones

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR Dow Jones has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, SPDR Dow is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

iShares Core MSCI

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core MSCI are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, IShares Core is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with SPDR Dow and IShares Core

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

The idea behind SPDR Dow Jones and iShares Core MSCI 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..