Correlation Between IShares Edge and SPDR Bloomberg

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

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

Diversification Opportunities for IShares Edge and SPDR Bloomberg

-0.03

Correlation Coefficient

IShares Edge  SPDR Bloomberg

Good diversification

The 3 months correlation between IShares and SPDR is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding iShares Edge Investment and SPDR Bloomberg Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Bloomberg Investment and IShares Edge 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 Edge Investment are associated (or correlated) with SPDR Bloomberg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Bloomberg Investment has no effect on the direction of IShares Edge i.e., IShares Edge and SPDR Bloomberg go up and down completely randomly.

Pair Corralation between IShares Edge and SPDR Bloomberg

Given the investment horizon of 90 days IShares Edge is expected to generate 3.65 times less return on investment than SPDR Bloomberg. In addition to that, IShares Edge is 9.84 times more volatile than SPDR Bloomberg Investment. It trades about 0.02 of its total potential returns per unit of risk. SPDR Bloomberg Investment is currently generating about 0.69 per unit of volatility. If you would invest  3,043  in SPDR Bloomberg Investment on November 29, 2024 and sell it today you would earn a total of  41.50  from holding SPDR Bloomberg Investment or generate 1.36% return on investment over 90 days.

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

iShares Edge Investment  vs.  SPDR Bloomberg Investment

iShares Edge Investment

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Edge Investment are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, IShares Edge is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

SPDR Bloomberg Investment

Risk-Adjusted Performance

Excellent

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Bloomberg Investment are ranked lower than 54 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, SPDR Bloomberg is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with IShares Edge and SPDR Bloomberg

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

The idea behind iShares Edge Investment and SPDR Bloomberg Investment 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.