Correlation Between IShares Trust and SPDR SSGA

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

By analyzing existing cross correlation between iShares Trust and SPDR SSGA My2029, you can compare the effects of market volatilities on IShares Trust and SPDR SSGA 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 Trust with a short position of SPDR SSGA. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Trust and SPDR SSGA.

Diversification Opportunities for IShares Trust and SPDR SSGA

0.82

Correlation Coefficient

IShares Trust  SPDR SSGA

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 Trust and SPDR SSGA My2029 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SSGA My2029 and IShares Trust 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 Trust are associated (or correlated) with SPDR SSGA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SSGA My2029 has no effect on the direction of IShares Trust i.e., IShares Trust and SPDR SSGA go up and down completely randomly.

Pair Corralation between IShares Trust and SPDR SSGA

Given the investment horizon of 90 days iShares Trust is expected to generate 0.6 times more return on investment than SPDR SSGA. However, iShares Trust is 1.67 times less risky than SPDR SSGA. It trades about -0.01 of its potential returns per unit of risk. SPDR SSGA My2029 is currently generating about -0.05 per unit of risk. If you would invest  2,533  in iShares Trust on October 8, 2024 and sell it today you would lose (2.00) from holding iShares Trust or give up 0.08% of portfolio value over 90 days.

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

iShares Trust   vs.  SPDR SSGA My2029

iShares Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable primary indicators, IShares Trust is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

SPDR SSGA My2029

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR SSGA My2029 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong primary indicators, SPDR SSGA is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with IShares Trust and SPDR SSGA

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

The idea behind iShares Trust and SPDR SSGA My2029 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.