Correlation Between IShares Intermediate and SPDR FTSE

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

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

Diversification Opportunities for IShares Intermediate and SPDR FTSE

0.82

Correlation Coefficient

IShares Intermediate  SPDR FTSE

Very poor diversification

The 3 months correlation between IShares and SPDR is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding iShares Intermediate Governmen and SPDR FTSE International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR FTSE International and IShares Intermediate 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 Intermediate GovernmentCredit are associated (or correlated) with SPDR FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR FTSE International has no effect on the direction of IShares Intermediate i.e., IShares Intermediate and SPDR FTSE go up and down completely randomly.

Pair Corralation between IShares Intermediate and SPDR FTSE

Considering the 90-day investment horizon iShares Intermediate GovernmentCredit is expected to generate 0.34 times more return on investment than SPDR FTSE. However, iShares Intermediate GovernmentCredit is 2.93 times less risky than SPDR FTSE. It trades about 0.09 of its potential returns per unit of risk. SPDR FTSE International is currently generating about -0.04 per unit of risk. If you would invest  10,169  in iShares Intermediate GovernmentCredit on September 26, 2024 and sell it today you would earn a total of  225.00  from holding iShares Intermediate GovernmentCredit or generate 2.21% return on investment over 90 days.

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

iShares Intermediate Governmen  vs.  SPDR FTSE International

iShares Intermediate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Intermediate GovernmentCredit has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, IShares Intermediate is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

SPDR FTSE International

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with IShares Intermediate and SPDR FTSE

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

The idea behind iShares Intermediate GovernmentCredit and SPDR FTSE International 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.

Check out your portfolio center.

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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.