Correlation Between SPDR Bloomberg and US Treasury

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

By analyzing existing cross correlation between SPDR Bloomberg Barclays and US Treasury 5, you can compare the effects of market volatilities on SPDR Bloomberg and US Treasury 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 Bloomberg with a short position of US Treasury. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Bloomberg and US Treasury.

Diversification Opportunities for SPDR Bloomberg and US Treasury

0.98

Correlation Coefficient

SPDR Bloomberg  US Treasury

Almost no diversification

The 3 months correlation between SPDR and UFIV is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Bloomberg Barclays and US Treasury 5 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Treasury 5 and SPDR Bloomberg 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 Bloomberg Barclays are associated (or correlated) with US Treasury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Treasury 5 has no effect on the direction of SPDR Bloomberg i.e., SPDR Bloomberg and US Treasury go up and down completely randomly.

Pair Corralation between SPDR Bloomberg and US Treasury

Considering the 90-day investment horizon SPDR Bloomberg Barclays is expected to generate 1.12 times more return on investment than US Treasury. However, SPDR Bloomberg is 1.12 times more volatile than US Treasury 5. It trades about -0.09 of its potential returns per unit of risk. US Treasury 5 is currently generating about -0.12 per unit of risk. If you would invest  2,882  in SPDR Bloomberg Barclays on September 4, 2024 and sell it today you would lose (42.00) from holding SPDR Bloomberg Barclays or give up 1.46% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

SPDR Bloomberg Barclays  vs.  US Treasury 5

SPDR Bloomberg Barclays

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR Bloomberg Barclays has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, SPDR Bloomberg is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

US Treasury 5

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days US Treasury 5 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable forward indicators, US Treasury is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with SPDR Bloomberg and US Treasury

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

The idea behind SPDR Bloomberg Barclays and US Treasury 5 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.