Correlation Between SPDR Bloomberg and SPDR Barclays

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

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

Diversification Opportunities for SPDR Bloomberg and SPDR Barclays

0.64

Correlation Coefficient

SPDR Bloomberg  SPDR Barclays

Poor diversification

The 3 months correlation between SPDR and SPDR is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Bloomberg Investment and SPDR Barclays Long in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Barclays Long 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 Investment are associated (or correlated) with SPDR Barclays. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Barclays Long has no effect on the direction of SPDR Bloomberg i.e., SPDR Bloomberg and SPDR Barclays go up and down completely randomly.

Pair Corralation between SPDR Bloomberg and SPDR Barclays

Given the investment horizon of 90 days SPDR Bloomberg is expected to generate 1.78 times less return on investment than SPDR Barclays. But when comparing it to its historical volatility, SPDR Bloomberg Investment is 19.78 times less risky than SPDR Barclays. It trades about 0.71 of its potential returns per unit of risk. SPDR Barclays Long is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2,218  in SPDR Barclays Long on December 24, 2024 and sell it today you would earn a total of  47.00  from holding SPDR Barclays Long or generate 2.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

SPDR Bloomberg Investment  vs.  SPDR Barclays Long

SPDR Bloomberg Investment

Risk-Adjusted Performance

Excellent

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Bloomberg Investment are ranked lower than 55 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, SPDR Bloomberg is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

SPDR Barclays Long

Risk-Adjusted Performance

Modest

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

Pair Trading with SPDR Bloomberg and SPDR Barclays

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

The idea behind SPDR Bloomberg Investment and SPDR Barclays Long 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.