Correlation Between IShares 1 and SPDR DoubleLine

Can any of the company-specific risk be diversified away by investing in both IShares 1 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 1 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 1 5 Year and SPDR DoubleLine Short, you can compare the effects of market volatilities on IShares 1 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 1 with a short position of SPDR DoubleLine. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares 1 and SPDR DoubleLine.

Diversification Opportunities for IShares 1 and SPDR DoubleLine

0.98

Correlation Coefficient

IShares 1  SPDR DoubleLine

Almost no diversification

The 3 months correlation between IShares and SPDR is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding iShares 1 5 Year and SPDR DoubleLine Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR DoubleLine Short and IShares 1 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 1 5 Year 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 Short has no effect on the direction of IShares 1 i.e., IShares 1 and SPDR DoubleLine go up and down completely randomly.

Pair Corralation between IShares 1 and SPDR DoubleLine

Given the investment horizon of 90 days iShares 1 5 Year is expected to generate 1.2 times more return on investment than SPDR DoubleLine. However, IShares 1 is 1.2 times more volatile than SPDR DoubleLine Short. It trades about 0.27 of its potential returns per unit of risk. SPDR DoubleLine Short is currently generating about 0.26 per unit of risk. If you would invest  5,133  in iShares 1 5 Year on December 29, 2024 and sell it today you would earn a total of  101.00  from holding iShares 1 5 Year or generate 1.97% return on investment over 90 days.

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

iShares 1 5 Year  vs.  SPDR DoubleLine Short

iShares 1 5

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares 1 5 Year are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, IShares 1 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

SPDR DoubleLine Short

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR DoubleLine Short are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, SPDR DoubleLine is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with IShares 1 and SPDR DoubleLine

The main advantage of trading using opposite IShares 1 and SPDR DoubleLine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares 1 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 1 5 Year and SPDR DoubleLine Short 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.