Correlation Between IShares Broker and SPDR SP

Can any of the company-specific risk be diversified away by investing in both IShares Broker 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 Broker 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 Broker Dealers Securities and SPDR SP Bank, you can compare the effects of market volatilities on IShares Broker 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 Broker with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Broker and SPDR SP.

Diversification Opportunities for IShares Broker and SPDR SP

0.78

Correlation Coefficient

IShares Broker  SPDR SP

Poor diversification

The 3 months correlation between IShares and SPDR is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding iShares Broker Dealers Securit and SPDR SP Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Bank and IShares Broker 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 Broker Dealers Securities 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 Bank has no effect on the direction of IShares Broker i.e., IShares Broker and SPDR SP go up and down completely randomly.

Pair Corralation between IShares Broker and SPDR SP

Considering the 90-day investment horizon iShares Broker Dealers Securities is expected to generate 0.73 times more return on investment than SPDR SP. However, iShares Broker Dealers Securities is 1.36 times less risky than SPDR SP. It trades about 0.15 of its potential returns per unit of risk. SPDR SP Bank is currently generating about 0.05 per unit of risk. If you would invest  13,590  in iShares Broker Dealers Securities on October 27, 2024 and sell it today you would earn a total of  1,930  from holding iShares Broker Dealers Securities or generate 14.2% return on investment over 90 days.

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

iShares Broker Dealers Securit  vs.  SPDR SP Bank

iShares Broker Dealers

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Broker Dealers Securities are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly conflicting basic indicators, IShares Broker demonstrated solid returns over the last few months and may actually be approaching a breakup point.

SPDR SP Bank

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP Bank are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental drivers, SPDR SP may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with IShares Broker and SPDR SP

The main advantage of trading using opposite IShares Broker and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Broker 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 Broker Dealers Securities and SPDR SP Bank 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.