Correlation Between IShares JP and SPDR DoubleLine

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

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

Diversification Opportunities for IShares JP and SPDR DoubleLine

0.22

Correlation Coefficient

IShares JP  SPDR DoubleLine

Modest diversification

The 3 months correlation between IShares and SPDR is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding iShares JP Morgan and SPDR DoubleLine Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR DoubleLine Short and IShares JP 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 JP Morgan are associated (or correlated) with SPDR DoubleLine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR DoubleLine Short has no effect on the direction of IShares JP i.e., IShares JP and SPDR DoubleLine go up and down completely randomly.

Pair Corralation between IShares JP and SPDR DoubleLine

Considering the 90-day investment horizon iShares JP Morgan is expected to generate 5.04 times more return on investment than SPDR DoubleLine. However, IShares JP is 5.04 times more volatile than SPDR DoubleLine Short. It trades about 0.1 of its potential returns per unit of risk. SPDR DoubleLine Short is currently generating about 0.24 per unit of risk. If you would invest  7,665  in iShares JP Morgan on October 5, 2024 and sell it today you would earn a total of  1,285  from holding iShares JP Morgan or generate 16.76% return on investment over 90 days.

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

iShares JP Morgan  vs.  SPDR DoubleLine Short

iShares JP Morgan

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares JP Morgan has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong primary indicators, IShares JP is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

SPDR DoubleLine Short

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR DoubleLine Short are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, SPDR DoubleLine is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with IShares JP and SPDR DoubleLine

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

The idea behind iShares JP Morgan and SPDR DoubleLine Short 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.