Correlation Between IShares IBonds and SPDR MSCI

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

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

Diversification Opportunities for IShares IBonds and SPDR MSCI

0.58

Correlation Coefficient

IShares IBonds  SPDR MSCI

Very weak diversification

The 3 months correlation between IShares and SPDR is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding iShares iBonds Dec and SPDR MSCI ACWI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR MSCI ACWI and IShares IBonds 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 iBonds Dec are associated (or correlated) with SPDR MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR MSCI ACWI has no effect on the direction of IShares IBonds i.e., IShares IBonds and SPDR MSCI go up and down completely randomly.

Pair Corralation between IShares IBonds and SPDR MSCI

Given the investment horizon of 90 days iShares iBonds Dec is expected to under-perform the SPDR MSCI. But the etf apears to be less risky and, when comparing its historical volatility, iShares iBonds Dec is 3.11 times less risky than SPDR MSCI. The etf trades about -0.06 of its potential returns per unit of risk. The SPDR MSCI ACWI is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  3,704  in SPDR MSCI ACWI on October 25, 2024 and sell it today you would earn a total of  36.00  from holding SPDR MSCI ACWI or generate 0.97% return on investment over 90 days.

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

iShares iBonds Dec  vs.  SPDR MSCI ACWI

iShares iBonds Dec

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares iBonds Dec has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, IShares IBonds is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

SPDR MSCI ACWI

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR MSCI ACWI are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, SPDR MSCI is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with IShares IBonds and SPDR MSCI

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

The idea behind iShares iBonds Dec and SPDR MSCI ACWI 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..