Correlation Between IShares SP and SPDR Bloomberg

Can any of the company-specific risk be diversified away by investing in both IShares SP 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 SP 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 SP 500 and SPDR Bloomberg 1 3, you can compare the effects of market volatilities on IShares SP 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 SP with a short position of SPDR Bloomberg. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares SP and SPDR Bloomberg.

Diversification Opportunities for IShares SP and SPDR Bloomberg

-0.39

Correlation Coefficient

IShares SP  SPDR Bloomberg

Very good diversification

The 3 months correlation between IShares and SPDR is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding iShares SP 500 and SPDR Bloomberg 1 3 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Bloomberg 1 and IShares SP 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 SP 500 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 1 has no effect on the direction of IShares SP i.e., IShares SP and SPDR Bloomberg go up and down completely randomly.

Pair Corralation between IShares SP and SPDR Bloomberg

Assuming the 90 days trading horizon iShares SP 500 is expected to under-perform the SPDR Bloomberg. In addition to that, IShares SP is 13.54 times more volatile than SPDR Bloomberg 1 3. It trades about -0.06 of its total potential returns per unit of risk. SPDR Bloomberg 1 3 is currently generating about 0.18 per unit of volatility. If you would invest  11,338  in SPDR Bloomberg 1 3 on December 21, 2024 and sell it today you would earn a total of  93.00  from holding SPDR Bloomberg 1 3 or generate 0.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.31%
Values	Daily Returns

iShares SP 500  vs.  SPDR Bloomberg 1 3

iShares SP 500

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, IShares SP is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

SPDR Bloomberg 1

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Bloomberg 1 3 are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, SPDR Bloomberg is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with IShares SP and SPDR Bloomberg

The main advantage of trading using opposite IShares SP and SPDR Bloomberg positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares SP 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 SP 500 and SPDR Bloomberg 1 3 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.