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 1 3 and US Treasury 12, 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

0.99

Correlation Coefficient

SPDR Bloomberg  US Treasury

No risk reduction

The 3 months correlation between SPDR and OBIL is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Bloomberg 1 3 and US Treasury 12 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Treasury 12 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 1 3 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 12 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 is expected to generate 1.06 times less return on investment than US Treasury. But when comparing it to its historical volatility, SPDR Bloomberg 1 3 is 3.03 times less risky than US Treasury. It trades about 1.34 of its potential returns per unit of risk. US Treasury 12 is currently generating about 0.47 of returns per unit of risk over similar time horizon. If you would invest  4,965  in US Treasury 12 on December 27, 2024 and sell it today you would earn a total of  51.00  from holding US Treasury 12 or generate 1.03% return on investment over 90 days.

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

SPDR Bloomberg 1 3  vs.  US Treasury 12

SPDR Bloomberg 1

Risk-Adjusted Performance

Market Crasher

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Bloomberg 1 3 are ranked lower than 96 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward indicators, SPDR Bloomberg is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

US Treasury 12

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in US Treasury 12 are ranked lower than 36 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward indicators, US Treasury is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional 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 1 3 and US Treasury 12 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.