Correlation Between IShares UK and SPDR SP

Can any of the company-specific risk be diversified away by investing in both IShares UK 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 UK 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 UK Property and SPDR SP Financials, you can compare the effects of market volatilities on IShares UK 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 UK with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares UK and SPDR SP.

Diversification Opportunities for IShares UK and SPDR SP

-0.89

Correlation Coefficient

IShares UK  SPDR SP

Pay attention - limited upside

The 3 months correlation between IShares and SPDR is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding iShares UK Property and SPDR SP Financials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Financials and IShares UK 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 UK Property 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 Financials has no effect on the direction of IShares UK i.e., IShares UK and SPDR SP go up and down completely randomly.

Pair Corralation between IShares UK and SPDR SP

Assuming the 90 days trading horizon iShares UK Property is expected to under-perform the SPDR SP. In addition to that, IShares UK is 1.06 times more volatile than SPDR SP Financials. It trades about -0.23 of its total potential returns per unit of risk. SPDR SP Financials is currently generating about 0.19 per unit of volatility. If you would invest  5,196  in SPDR SP Financials on September 14, 2024 and sell it today you would earn a total of  597.00  from holding SPDR SP Financials or generate 11.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

iShares UK Property  vs.  SPDR SP Financials

iShares UK Property

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares UK Property has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Etf's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the fund sophisticated investors.

SPDR SP Financials

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP Financials are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, SPDR SP may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with IShares UK and SPDR SP

The main advantage of trading using opposite IShares UK and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares UK 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.

The idea behind iShares UK Property and SPDR SP Financials 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.