Correlation Between IShares Core and SPDR Series

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

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

Diversification Opportunities for IShares Core and SPDR Series

0.86

Correlation Coefficient

IShares Core  SPDR Series

Very poor diversification

The 3 months correlation between IShares and SPDR is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core Dividend and SPDR Series Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Series Trust and IShares Core 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 Core Dividend are associated (or correlated) with SPDR Series. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Series Trust has no effect on the direction of IShares Core i.e., IShares Core and SPDR Series go up and down completely randomly.

Pair Corralation between IShares Core and SPDR Series

Given the investment horizon of 90 days iShares Core Dividend is expected to generate 0.84 times more return on investment than SPDR Series. However, iShares Core Dividend is 1.19 times less risky than SPDR Series. It trades about 0.01 of its potential returns per unit of risk. SPDR Series Trust is currently generating about 0.0 per unit of risk. If you would invest  6,093  in iShares Core Dividend on December 28, 2024 and sell it today you would earn a total of  22.00  from holding iShares Core Dividend or generate 0.36% return on investment over 90 days.

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

iShares Core Dividend  vs.  SPDR Series Trust

iShares Core Dividend

Risk-Adjusted Performance

Insignificant

Over the last 90 days iShares Core Dividend has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, IShares Core is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

SPDR Series Trust

Risk-Adjusted Performance

Weak

Over the last 90 days SPDR Series Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, SPDR Series is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with IShares Core and SPDR Series

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

The idea behind iShares Core Dividend and SPDR Series 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.