Correlation Between SPDR SP and SPDR MSCI

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

Diversification Opportunities for SPDR SP and SPDR MSCI

-0.62

Correlation Coefficient

SPDR SP  SPDR MSCI

Excellent diversification

The 3 months correlation between SPDR and SPDR is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP Dividend and SPDR MSCI Europe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR MSCI Europe and SPDR SP 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 SP Dividend 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 Europe has no effect on the direction of SPDR SP i.e., SPDR SP and SPDR MSCI go up and down completely randomly.

Pair Corralation between SPDR SP and SPDR MSCI

Assuming the 90 days trading horizon SPDR SP Dividend is expected to generate 1.05 times more return on investment than SPDR MSCI. However, SPDR SP is 1.05 times more volatile than SPDR MSCI Europe. It trades about 0.13 of its potential returns per unit of risk. SPDR MSCI Europe is currently generating about -0.06 per unit of risk. If you would invest  5,895  in SPDR SP Dividend on September 3, 2024 and sell it today you would earn a total of  360.00  from holding SPDR SP Dividend or generate 6.11% return on investment over 90 days.

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

SPDR SP Dividend  vs.  SPDR MSCI Europe

SPDR SP Dividend

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP Dividend are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, SPDR SP is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

SPDR MSCI Europe

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR MSCI Europe has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, SPDR MSCI is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with SPDR SP and SPDR MSCI

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