Correlation Between SPDR SP and IShares Core

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

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

Diversification Opportunities for SPDR SP and IShares Core

0.38

Correlation Coefficient

SPDR SP  IShares Core

Weak diversification

The 3 months correlation between SPDR and IShares is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP Global and iShares Core Moderate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core Moderate and SPDR SP 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 SP Global are associated (or correlated) with IShares Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Core Moderate has no effect on the direction of SPDR SP i.e., SPDR SP and IShares Core go up and down completely randomly.

Pair Corralation between SPDR SP and IShares Core

Considering the 90-day investment horizon SPDR SP Global is expected to under-perform the IShares Core. In addition to that, SPDR SP is 2.48 times more volatile than iShares Core Moderate. It trades about -0.21 of its total potential returns per unit of risk. iShares Core Moderate is currently generating about -0.04 per unit of volatility. If you would invest  4,391  in iShares Core Moderate on October 5, 2024 and sell it today you would lose (37.00) from holding iShares Core Moderate or give up 0.84% of portfolio value over 90 days.

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

SPDR SP Global  vs.  iShares Core Moderate

SPDR SP Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR SP Global has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Etf's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the ETF retail investors.

iShares Core Moderate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Core Moderate 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.

Pair Trading with SPDR SP and IShares Core

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

The idea behind SPDR SP Global and iShares Core Moderate 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.