Correlation Between IShares Treasury and SPDR Barclays

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

By analyzing existing cross correlation between iShares Treasury Bond and SPDR Barclays 10, you can compare the effects of market volatilities on IShares Treasury and SPDR Barclays 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 Treasury with a short position of SPDR Barclays. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Treasury and SPDR Barclays.

Diversification Opportunities for IShares Treasury and SPDR Barclays

1.0

Correlation Coefficient

IShares Treasury  SPDR Barclays

No risk reduction

The 3 months correlation between IShares and SPDR is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding iShares Treasury Bond and SPDR Barclays 10 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Barclays 10 and IShares Treasury 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 Treasury Bond are associated (or correlated) with SPDR Barclays. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Barclays 10 has no effect on the direction of IShares Treasury i.e., IShares Treasury and SPDR Barclays go up and down completely randomly.

Pair Corralation between IShares Treasury and SPDR Barclays

Assuming the 90 days trading horizon iShares Treasury Bond is expected to under-perform the SPDR Barclays. In addition to that, IShares Treasury is 1.14 times more volatile than SPDR Barclays 10. It trades about -0.03 of its total potential returns per unit of risk. SPDR Barclays 10 is currently generating about -0.02 per unit of volatility. If you would invest  2,205  in SPDR Barclays 10 on December 1, 2024 and sell it today you would lose (21.00) from holding SPDR Barclays 10 or give up 0.95% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.41%
Values	Daily Returns

iShares Treasury Bond  vs.  SPDR Barclays 10

iShares Treasury Bond

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Treasury Bond has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, IShares Treasury is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

SPDR Barclays 10

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR Barclays 10 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, SPDR Barclays 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 Treasury and SPDR Barclays

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

The idea behind iShares Treasury Bond and SPDR Barclays 10 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.