Correlation Between SPDR MSCI and IShares Paris

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

By analyzing existing cross correlation between SPDR MSCI Emerging and iShares Paris Aligned Climate, you can compare the effects of market volatilities on SPDR MSCI and IShares Paris 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 IShares Paris. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR MSCI and IShares Paris.

Diversification Opportunities for SPDR MSCI and IShares Paris

0.44

Correlation Coefficient

SPDR MSCI  IShares Paris

Very weak diversification

The 3 months correlation between SPDR and IShares is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding SPDR MSCI Emerging and iShares Paris Aligned Climate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Paris Aligned 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 Emerging are associated (or correlated) with IShares Paris. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Paris Aligned has no effect on the direction of SPDR MSCI i.e., SPDR MSCI and IShares Paris go up and down completely randomly.

Pair Corralation between SPDR MSCI and IShares Paris

Given the investment horizon of 90 days SPDR MSCI is expected to generate 1.11 times less return on investment than IShares Paris. In addition to that, SPDR MSCI is 1.24 times more volatile than iShares Paris Aligned Climate. It trades about 0.04 of its total potential returns per unit of risk. iShares Paris Aligned Climate is currently generating about 0.05 per unit of volatility. If you would invest  4,928  in iShares Paris Aligned Climate on September 4, 2024 and sell it today you would earn a total of  443.00  from holding iShares Paris Aligned Climate or generate 8.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	44.65%
Values	Daily Returns

SPDR MSCI Emerging  vs.  iShares Paris Aligned Climate

SPDR MSCI Emerging

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR MSCI Emerging are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong primary indicators, SPDR MSCI is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

iShares Paris Aligned

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Paris Aligned Climate has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, IShares Paris is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with SPDR MSCI and IShares Paris

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

The idea behind SPDR MSCI Emerging and iShares Paris Aligned Climate 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.

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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.