Correlation Between SPDR Emerging and FTSE EM

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Can any of the company-specific risk be diversified away by investing in both SPDR Emerging and FTSE EM 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 Emerging and FTSE EM into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR Emerging Markets and FTSE EM ETF, you can compare the effects of market volatilities on SPDR Emerging and FTSE EM 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 Emerging with a short position of FTSE EM. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Emerging and FTSE EM.

Diversification Opportunities for SPDR Emerging and FTSE EM

1.0
  Correlation Coefficient

No risk reduction

The 3 months correlation between SPDR Emerging and FTSE EM is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Emerging Markets and FTSE EM ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FTSE EM ETF and SPDR Emerging 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 Emerging Markets are associated (or correlated) with FTSE EM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FTSE EM ETF has no effect on the direction of SPDR Emerging i.e., SPDR Emerging and FTSE EM go up and down completely randomly.

Pair Corralation between SPDR Emerging and FTSE EM

Given the investment horizon of 90 days SPDR Emerging Markets is expected to generate 0.97 times more return on investment than FTSE EM. However, SPDR Emerging Markets is 1.03 times less risky than FTSE EM. It trades about -0.15 of its potential returns per unit of risk. FTSE EM ETF is currently generating about -0.15 per unit of risk. If you would invest  3,616  in SPDR Emerging Markets on April 5, 2022 and sell it today you would lose (159.00)  from holding SPDR Emerging Markets or give up 4.4% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

SPDR Emerging Markets  vs.  FTSE EM ETF

 Performance (%) 
      Timeline 
SPDR Emerging Markets 
SPDR Emerging Performance
0 of 100
Over the last 90 days SPDR Emerging Markets has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest uncertain performance, the Etf's technical and fundamental indicators remain steady and the new chaos on Wall Street may also be a sign of medium-term gains for the ETF firm stakeholders.

SPDR Emerging Price Channel

FTSE EM ETF 
FTSE EM Performance
0 of 100
Over the last 90 days FTSE EM ETF has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Etf's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the ETF venture institutional investors.

FTSE EM Price Channel

SPDR Emerging and FTSE EM Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with SPDR Emerging and FTSE EM

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

SPDR Emerging Markets

Pair trading matchups for SPDR Emerging

The idea behind SPDR Emerging Markets and FTSE EM ETF 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.

FTSE EM ETF

Pair trading matchups for FTSE EM

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

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