Correlation Between IShares Global and SP 500

Can any of the company-specific risk be diversified away by investing in both IShares Global and SP 500 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 Global and SP 500 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between iShares Global REIT and SP 500 Index, you can compare the effects of market volatilities on IShares Global and SP 500 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 Global with a short position of SP 500. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Global and SP 500.

Diversification Opportunities for IShares Global and SP 500

0.75

Correlation Coefficient

IShares Global  SP 500

Poor diversification

The 3 months correlation between IShares and GSPC is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding iShares Global REIT and SP 500 Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SP 500 Index and IShares Global 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 Global REIT are associated (or correlated) with SP 500. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SP 500 Index has no effect on the direction of IShares Global i.e., IShares Global and SP 500 go up and down completely randomly.

Pair Corralation between IShares Global and SP 500

Given the investment horizon of 90 days IShares Global is expected to generate 17.97 times less return on investment than SP 500. In addition to that, IShares Global is 1.06 times more volatile than SP 500 Index. It trades about 0.01 of its total potential returns per unit of risk. SP 500 Index is currently generating about 0.22 per unit of volatility. If you would invest  565,038  in SP 500 Index on May 5, 2025 and sell it today you would earn a total of  58,763  from holding SP 500 Index or generate 10.4% return on investment over 90 days.

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

iShares Global REIT  vs.  SP 500 Index

Pair Trading with IShares Global and SP 500

The main advantage of trading using opposite IShares Global and SP 500 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Global position performs unexpectedly, SP 500 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 SP 500 will offset losses from the drop in SP 500's long position.

The idea behind iShares Global REIT and SP 500 Index 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.