Correlation Between SPDR Portfolio and IShares Morningstar

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

By analyzing existing cross correlation between SPDR Portfolio SP and iShares Morningstar Value, you can compare the effects of market volatilities on SPDR Portfolio and IShares Morningstar 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 Morningstar. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Portfolio and IShares Morningstar.

Diversification Opportunities for SPDR Portfolio and IShares Morningstar

0.94

Correlation Coefficient

SPDR Portfolio  IShares Morningstar

Almost no diversification

The 3 months correlation between SPDR and IShares is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Portfolio SP and iShares Morningstar Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Morningstar Value 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 SP are associated (or correlated) with IShares Morningstar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Morningstar Value has no effect on the direction of SPDR Portfolio i.e., SPDR Portfolio and IShares Morningstar go up and down completely randomly.

Pair Corralation between SPDR Portfolio and IShares Morningstar

Given the investment horizon of 90 days SPDR Portfolio SP is expected to generate 0.97 times more return on investment than IShares Morningstar. However, SPDR Portfolio SP is 1.03 times less risky than IShares Morningstar. It trades about 0.0 of its potential returns per unit of risk. iShares Morningstar Value is currently generating about -0.04 per unit of risk. If you would invest  4,821  in SPDR Portfolio SP on February 3, 2024 and sell it today you would lose (9.00) from holding SPDR Portfolio SP or give up 0.19% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

SPDR Portfolio SP  vs.  iShares Morningstar Value

SPDR Portfolio SP

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Portfolio SP are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, SPDR Portfolio is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

iShares Morningstar Value

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Morningstar Value are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable forward-looking signals, IShares Morningstar is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with SPDR Portfolio and IShares Morningstar

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

The idea behind SPDR Portfolio SP and iShares Morningstar Value 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.