Correlation Between SPDR Bloomberg and IShares Agency

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

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

Diversification Opportunities for SPDR Bloomberg and IShares Agency

0.75

Correlation Coefficient

SPDR Bloomberg  IShares Agency

Poor diversification

The 3 months correlation between SPDR and IShares is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Bloomberg International and iShares Agency Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Agency Bond and SPDR Bloomberg 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 SPDR Bloomberg International are associated (or correlated) with IShares Agency. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Agency Bond has no effect on the direction of SPDR Bloomberg i.e., SPDR Bloomberg and IShares Agency go up and down completely randomly.

Pair Corralation between SPDR Bloomberg and IShares Agency

Given the investment horizon of 90 days SPDR Bloomberg International is expected to generate 2.42 times more return on investment than IShares Agency. However, SPDR Bloomberg is 2.42 times more volatile than iShares Agency Bond. It trades about 0.03 of its potential returns per unit of risk. iShares Agency Bond is currently generating about 0.07 per unit of risk. If you would invest  2,614  in SPDR Bloomberg International on September 26, 2024 and sell it today you would earn a total of  232.00  from holding SPDR Bloomberg International or generate 8.88% return on investment over 90 days.

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

SPDR Bloomberg International  vs.  iShares Agency Bond

SPDR Bloomberg Inter

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR Bloomberg International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

iShares Agency Bond

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with SPDR Bloomberg and IShares Agency

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

The idea behind SPDR Bloomberg International and iShares Agency Bond 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.