Correlation Between IShares UBS and SPDR SP

Can any of the company-specific risk be diversified away by investing in both IShares UBS 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 UBS 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 UBS Government and SPDR SP Emerging, you can compare the effects of market volatilities on IShares UBS 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 UBS with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares UBS and SPDR SP.

Diversification Opportunities for IShares UBS and SPDR SP

-0.54

Correlation Coefficient

IShares UBS  SPDR SP

Excellent diversification

The 3 months correlation between IShares and SPDR is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding iShares UBS Government and SPDR SP Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Emerging and IShares UBS 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 UBS Government 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 Emerging has no effect on the direction of IShares UBS i.e., IShares UBS and SPDR SP go up and down completely randomly.

Pair Corralation between IShares UBS and SPDR SP

Assuming the 90 days trading horizon iShares UBS Government is expected to under-perform the SPDR SP. But the etf apears to be less risky and, when comparing its historical volatility, iShares UBS Government is 2.76 times less risky than SPDR SP. The etf trades about -0.08 of its potential returns per unit of risk. The SPDR SP Emerging is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  2,333  in SPDR SP Emerging on September 14, 2024 and sell it today you would earn a total of  274.00  from holding SPDR SP Emerging or generate 11.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

iShares UBS Government  vs.  SPDR SP Emerging

iShares UBS Government

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares UBS Government has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental drivers, IShares UBS is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

SPDR SP Emerging

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP Emerging are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, SPDR SP may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with IShares UBS and SPDR SP

The main advantage of trading using opposite IShares UBS and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares UBS 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.

The idea behind iShares UBS Government and SPDR SP Emerging 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.