Correlation Between IShares MSCI and SPDR MSCI
Can any of the company-specific risk be diversified away by investing in both IShares MSCI 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 IShares MSCI and SPDR MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares MSCI ACWI and SPDR MSCI EAFE, you can compare the effects of market volatilities on IShares MSCI 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 IShares MSCI with a short position of SPDR MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and SPDR MSCI.
Diversification Opportunities for IShares MSCI and SPDR MSCI
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and SPDR is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI ACWI and SPDR MSCI EAFE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR MSCI EAFE and IShares 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 iShares MSCI ACWI 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 EAFE has no effect on the direction of IShares MSCI i.e., IShares MSCI and SPDR MSCI go up and down completely randomly.
Pair Corralation between IShares MSCI and SPDR MSCI
Given the investment horizon of 90 days iShares MSCI ACWI is expected to under-perform the SPDR MSCI. In addition to that, IShares MSCI is 1.12 times more volatile than SPDR MSCI EAFE. It trades about -0.04 of its total potential returns per unit of risk. SPDR MSCI EAFE is currently generating about 0.02 per unit of volatility. If you would invest 7,516 in SPDR MSCI EAFE on February 5, 2024 and sell it today you would earn a total of 26.00 from holding SPDR MSCI EAFE or generate 0.35% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
iShares MSCI ACWI vs. SPDR MSCI EAFE
Performance |
Timeline |
iShares MSCI ACWI |
SPDR MSCI EAFE |
IShares MSCI and SPDR MSCI Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with IShares MSCI and SPDR MSCI
The main advantage of trading using opposite IShares MSCI and SPDR MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI 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.IShares MSCI vs. VanEck Morningstar International | IShares MSCI vs. VanEck ETF Trust | IShares MSCI vs. VanEck ETF Trust | IShares MSCI vs. iShares Morningstar Mid Cap |
SPDR MSCI vs. Vanguard FTSE Emerging | SPDR MSCI vs. Vanguard Small Cap Index | SPDR MSCI vs. Vanguard Value Index | SPDR MSCI vs. Vanguard Small Cap Value |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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