Correlation Between IShares National and SPDR Bloomberg

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

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

Diversification Opportunities for IShares National and SPDR Bloomberg

0.7

Correlation Coefficient

IShares National  SPDR Bloomberg

Poor diversification

The 3 months correlation between IShares and SPDR is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding iShares National Muni and SPDR Bloomberg Barclays in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Bloomberg Barclays and IShares National 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 National Muni are associated (or correlated) with SPDR Bloomberg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Bloomberg Barclays has no effect on the direction of IShares National i.e., IShares National and SPDR Bloomberg go up and down completely randomly.

Pair Corralation between IShares National and SPDR Bloomberg

Considering the 90-day investment horizon IShares National is expected to generate 1.54 times less return on investment than SPDR Bloomberg. But when comparing it to its historical volatility, iShares National Muni is 1.06 times less risky than SPDR Bloomberg. It trades about 0.16 of its potential returns per unit of risk. SPDR Bloomberg Barclays is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  2,396  in SPDR Bloomberg Barclays on September 5, 2024 and sell it today you would earn a total of  48.00  from holding SPDR Bloomberg Barclays or generate 2.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

iShares National Muni  vs.  SPDR Bloomberg Barclays

iShares National Muni

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares National Muni are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, IShares National is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

SPDR Bloomberg Barclays

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Bloomberg Barclays are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical indicators, SPDR Bloomberg is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with IShares National and SPDR Bloomberg

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

The idea behind iShares National Muni and SPDR Bloomberg Barclays 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 Transaction History module to view history of all your transactions and understand their impact on performance.