Correlation Between IShares Ultra and SPDR DoubleLine

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

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

Diversification Opportunities for IShares Ultra and SPDR DoubleLine

0.28

Correlation Coefficient

IShares Ultra  SPDR DoubleLine

Modest diversification

The 3 months correlation between IShares and SPDR is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding iShares Ultra Short Term and SPDR DoubleLine Total in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR DoubleLine Total and IShares Ultra 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 Ultra Short Term are associated (or correlated) with SPDR DoubleLine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR DoubleLine Total has no effect on the direction of IShares Ultra i.e., IShares Ultra and SPDR DoubleLine go up and down completely randomly.

Pair Corralation between IShares Ultra and SPDR DoubleLine

Given the investment horizon of 90 days IShares Ultra is expected to generate 1.08 times less return on investment than SPDR DoubleLine. But when comparing it to its historical volatility, iShares Ultra Short Term is 9.58 times less risky than SPDR DoubleLine. It trades about 0.69 of its potential returns per unit of risk. SPDR DoubleLine Total is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  3,984  in SPDR DoubleLine Total on December 2, 2024 and sell it today you would earn a total of  53.00  from holding SPDR DoubleLine Total or generate 1.33% return on investment over 90 days.

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

iShares Ultra Short Term  vs.  SPDR DoubleLine Total

iShares Ultra Short

Risk-Adjusted Performance

Excellent

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Ultra Short Term are ranked lower than 54 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, IShares Ultra is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

SPDR DoubleLine Total

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR DoubleLine Total are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, SPDR DoubleLine is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with IShares Ultra and SPDR DoubleLine

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

The idea behind iShares Ultra Short Term and SPDR DoubleLine Total 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.