Correlation Between IShares Core and SPDR SP

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

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

Diversification Opportunities for IShares Core and SPDR SP

0.9

Correlation Coefficient

IShares Core  SPDR SP

Almost no diversification

The 3 months correlation between IShares and SPDR is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core High and SPDR SP Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Dividend 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 High are associated (or correlated) with SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP Dividend has no effect on the direction of IShares Core i.e., IShares Core and SPDR SP go up and down completely randomly.

Pair Corralation between IShares Core and SPDR SP

Considering the 90-day investment horizon iShares Core High is expected to generate 1.06 times more return on investment than SPDR SP. However, IShares Core is 1.06 times more volatile than SPDR SP Dividend. It trades about -0.47 of its potential returns per unit of risk. SPDR SP Dividend is currently generating about -0.54 per unit of risk. If you would invest  11,946  in iShares Core High on September 24, 2024 and sell it today you would lose (752.00) from holding iShares Core High or give up 6.29% of portfolio value over 90 days.

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

iShares Core High  vs.  SPDR SP Dividend

iShares Core High

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Core High has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable fundamental indicators, IShares Core is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

SPDR SP Dividend

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR SP Dividend has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, SPDR SP is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IShares Core and SPDR SP

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

The idea behind iShares Core High and SPDR SP Dividend 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .