Correlation Between SPDR MSCI and SPDR Dow
Can any of the company-specific risk be diversified away by investing in both SPDR MSCI and SPDR Dow 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 Dow into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR MSCI World and SPDR Dow Jones, you can compare the effects of market volatilities on SPDR MSCI and SPDR Dow 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 Dow. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR MSCI and SPDR Dow.
Diversification Opportunities for SPDR MSCI and SPDR Dow
Almost no diversification
The 3 months correlation between SPDR and SPDR is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding SPDR MSCI World and SPDR Dow Jones in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Dow Jones 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 World are associated (or correlated) with SPDR Dow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Dow Jones has no effect on the direction of SPDR MSCI i.e., SPDR MSCI and SPDR Dow go up and down completely randomly.
Pair Corralation between SPDR MSCI and SPDR Dow
Assuming the 90 days trading horizon SPDR MSCI is expected to generate 1.38 times less return on investment than SPDR Dow. But when comparing it to its historical volatility, SPDR MSCI World is 1.1 times less risky than SPDR Dow. It trades about 0.17 of its potential returns per unit of risk. SPDR Dow Jones is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 37,184 in SPDR Dow Jones on September 16, 2024 and sell it today you would earn a total of 4,756 from holding SPDR Dow Jones or generate 12.79% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
SPDR MSCI World vs. SPDR Dow Jones
Performance |
Timeline |
SPDR MSCI World |
SPDR Dow Jones |
SPDR MSCI and SPDR Dow Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with SPDR MSCI and SPDR Dow
The main advantage of trading using opposite SPDR MSCI and SPDR Dow positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR MSCI position performs unexpectedly, SPDR Dow 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 Dow will offset losses from the drop in SPDR Dow's long position.SPDR MSCI vs. SPDR Dow Jones | SPDR MSCI vs. iShares Core MSCI | SPDR MSCI vs. iShares SP 500 | SPDR MSCI vs. iShares Core MSCI |
SPDR Dow vs. iShares Core MSCI | SPDR Dow vs. iShares SP 500 | SPDR Dow vs. iShares Core MSCI | SPDR Dow vs. iShares MSCI World |
Check out your portfolio center.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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
Other Complementary Tools
Commodity Directory Find actively traded commodities issued by global exchanges | |
Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities | |
Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets |