Correlation Between SPDR Bloomberg and IShares Trust

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

By analyzing existing cross correlation between SPDR Bloomberg Short and iShares Trust , you can compare the effects of market volatilities on SPDR Bloomberg and IShares Trust 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 IShares Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Bloomberg and IShares Trust.

Diversification Opportunities for SPDR Bloomberg and IShares Trust

0.49

Correlation Coefficient

SPDR Bloomberg  IShares Trust

Very weak diversification

The 3 months correlation between SPDR and IShares is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Bloomberg Short and iShares Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Trust 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 Short are associated (or correlated) with IShares Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Trust has no effect on the direction of SPDR Bloomberg i.e., SPDR Bloomberg and IShares Trust go up and down completely randomly.

Pair Corralation between SPDR Bloomberg and IShares Trust

Given the investment horizon of 90 days SPDR Bloomberg Short is expected to generate 0.75 times more return on investment than IShares Trust. However, SPDR Bloomberg Short is 1.33 times less risky than IShares Trust. It trades about 0.22 of its potential returns per unit of risk. iShares Trust is currently generating about 0.11 per unit of risk. If you would invest  2,501  in SPDR Bloomberg Short on August 30, 2024 and sell it today you would earn a total of  61.00  from holding SPDR Bloomberg Short or generate 2.44% return on investment over 90 days.

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

SPDR Bloomberg Short  vs.  iShares Trust

SPDR Bloomberg Short

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Bloomberg Short are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, SPDR Bloomberg is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

iShares Trust

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Trust are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively steady technical indicators, IShares Trust is not utilizing all of its potentials. The current stock price chaos, may contribute to medium-term losses for the stakeholders.

Pair Trading with SPDR Bloomberg and IShares Trust

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

The idea behind SPDR Bloomberg Short and iShares Trust 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.