Correlation Between IShares Biotechnology and SPDR SP
Can any of the company-specific risk be diversified away by investing in both IShares Biotechnology and SPDR SP 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 Biotechnology and SPDR SP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Biotechnology ETF and SPDR SP Biotech, you can compare the effects of market volatilities on IShares Biotechnology and SPDR SP 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 Biotechnology with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Biotechnology and SPDR SP.
Diversification Opportunities for IShares Biotechnology and SPDR SP
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IShares and SPDR is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding iShares Biotechnology ETF and SPDR SP Biotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Biotech and IShares Biotechnology 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 Biotechnology ETF are associated (or correlated) with SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP Biotech has no effect on the direction of IShares Biotechnology i.e., IShares Biotechnology and SPDR SP go up and down completely randomly.
Pair Corralation between IShares Biotechnology and SPDR SP
Considering the 90-day investment horizon iShares Biotechnology ETF is expected to under-perform the SPDR SP. But the etf apears to be less risky and, when comparing its historical volatility, iShares Biotechnology ETF is 1.12 times less risky than SPDR SP. The etf trades about -0.01 of its potential returns per unit of risk. The SPDR SP Biotech is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 8,439 in SPDR SP Biotech on March 28, 2025 and sell it today you would lose (112.00) from holding SPDR SP Biotech or give up 1.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Biotechnology ETF vs. SPDR SP Biotech
Performance |
| Timeline |
| iShares Biotechnology ETF |
| SPDR SP Biotech |
IShares Biotechnology and SPDR SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Biotechnology and SPDR SP
The main advantage of trading using opposite IShares Biotechnology and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Biotechnology position performs unexpectedly, SPDR SP 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 SP will offset losses from the drop in SPDR SP's long position.| IShares Biotechnology vs. First Trust Exchange Traded | IShares Biotechnology vs. Horizon Kinetics Medical | IShares Biotechnology vs. Harbor Health Care | IShares Biotechnology vs. American Beacon Select |
| SPDR SP vs. iShares Biotechnology ETF | SPDR SP vs. Health Care Select | SPDR SP vs. Technology Select Sector | SPDR SP vs. Industrial Select Sector |
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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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