Correlation Between IShares Trust and SPDR Portfolio

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

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

Diversification Opportunities for IShares Trust and SPDR Portfolio

-0.01

Correlation Coefficient

IShares Trust  SPDR Portfolio

Good diversification

The 3 months correlation between IShares and SPDR is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding iShares Trust and SPDR Portfolio Intermediate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Portfolio Inter and IShares Trust 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 Trust are associated (or correlated) with SPDR Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Portfolio Inter has no effect on the direction of IShares Trust i.e., IShares Trust and SPDR Portfolio go up and down completely randomly.

Pair Corralation between IShares Trust and SPDR Portfolio

Given the investment horizon of 90 days iShares Trust is expected to under-perform the SPDR Portfolio. In addition to that, IShares Trust is 2.63 times more volatile than SPDR Portfolio Intermediate. It trades about 0.0 of its total potential returns per unit of risk. SPDR Portfolio Intermediate is currently generating about 0.18 per unit of volatility. If you would invest  2,773  in SPDR Portfolio Intermediate on December 28, 2024 and sell it today you would earn a total of  79.00  from holding SPDR Portfolio Intermediate or generate 2.85% return on investment over 90 days.

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

iShares Trust  vs.  SPDR Portfolio Intermediate

iShares Trust

Risk-Adjusted Performance

Weak

Over the last 90 days iShares Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, IShares Trust is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

SPDR Portfolio Inter

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Portfolio Intermediate are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, SPDR Portfolio is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with IShares Trust and SPDR Portfolio

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

The idea behind iShares Trust and SPDR Portfolio Intermediate 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.