Correlation Between SPDR Portfolio and IShares MSCI

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

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

Diversification Opportunities for SPDR Portfolio and IShares MSCI

0.9

Correlation Coefficient

SPDR Portfolio  IShares MSCI

Almost no diversification

The 3 months correlation between SPDR and IShares is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Portfolio MSCI and iShares MSCI Kokusai in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI Kokusai 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 MSCI are associated (or correlated) with IShares MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares MSCI Kokusai has no effect on the direction of SPDR Portfolio i.e., SPDR Portfolio and IShares MSCI go up and down completely randomly.

Pair Corralation between SPDR Portfolio and IShares MSCI

Given the investment horizon of 90 days SPDR Portfolio MSCI is expected to generate 1.18 times more return on investment than IShares MSCI. However, SPDR Portfolio is 1.18 times more volatile than iShares MSCI Kokusai. It trades about 0.31 of its potential returns per unit of risk. iShares MSCI Kokusai is currently generating about 0.36 per unit of risk. If you would invest  6,335  in SPDR Portfolio MSCI on September 4, 2024 and sell it today you would earn a total of  262.00  from holding SPDR Portfolio MSCI or generate 4.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.24%
Values	Daily Returns

SPDR Portfolio MSCI  vs.  iShares MSCI Kokusai

SPDR Portfolio MSCI

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Portfolio MSCI are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain technical and fundamental indicators, SPDR Portfolio may actually be approaching a critical reversion point that can send shares even higher in January 2025.

iShares MSCI Kokusai

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI Kokusai are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite sluggish basic indicators, IShares MSCI may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with SPDR Portfolio and IShares MSCI

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

The idea behind SPDR Portfolio MSCI and iShares MSCI Kokusai 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..