Correlation Between IShares Govt and SPDR Bloomberg

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

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

Diversification Opportunities for IShares Govt and SPDR Bloomberg

0.81

Correlation Coefficient

IShares Govt  SPDR Bloomberg

Very poor diversification

The 3 months correlation between IShares and SPDR is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding iShares Govt Bond and SPDR Bloomberg Euro in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Bloomberg Euro and IShares Govt 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 Govt Bond are associated (or correlated) with SPDR Bloomberg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Bloomberg Euro has no effect on the direction of IShares Govt i.e., IShares Govt and SPDR Bloomberg go up and down completely randomly.

Pair Corralation between IShares Govt and SPDR Bloomberg

Assuming the 90 days trading horizon iShares Govt Bond is expected to generate 2.11 times more return on investment than SPDR Bloomberg. However, IShares Govt is 2.11 times more volatile than SPDR Bloomberg Euro. It trades about 0.08 of its potential returns per unit of risk. SPDR Bloomberg Euro is currently generating about 0.09 per unit of risk. If you would invest  18,191  in iShares Govt Bond on September 13, 2024 and sell it today you would earn a total of  522.00  from holding iShares Govt Bond or generate 2.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.46%
Values	Daily Returns

iShares Govt Bond  vs.  SPDR Bloomberg Euro

iShares Govt Bond

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Govt Bond are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, IShares Govt is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

SPDR Bloomberg Euro

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Bloomberg Euro are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, SPDR Bloomberg is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with IShares Govt and SPDR Bloomberg

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

The idea behind iShares Govt Bond and SPDR Bloomberg Euro 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.