Correlation Between IShares Core and SPDR DoubleLine

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

Diversification Opportunities for IShares Core and SPDR DoubleLine

1.0

Correlation Coefficient

IShares Core  SPDR DoubleLine

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 Core Total and SPDR DoubleLine Total in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR DoubleLine Total and IShares Core 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 Core Total 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 Total has no effect on the direction of IShares Core i.e., IShares Core and SPDR DoubleLine go up and down completely randomly.

Pair Corralation between IShares Core and SPDR DoubleLine

Given the investment horizon of 90 days iShares Core Total is expected to generate 1.01 times more return on investment than SPDR DoubleLine. However, IShares Core is 1.01 times more volatile than SPDR DoubleLine Total. It trades about -0.01 of its potential returns per unit of risk. SPDR DoubleLine Total is currently generating about -0.03 per unit of risk. If you would invest  4,635  in iShares Core Total on September 1, 2024 and sell it today you would lose (13.00) from holding iShares Core Total or give up 0.28% of portfolio value over 90 days.

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

iShares Core Total  vs.  SPDR DoubleLine Total

iShares Core Total

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Core Total has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, IShares Core is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

SPDR DoubleLine Total

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR DoubleLine Total has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, SPDR DoubleLine is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with IShares Core and SPDR DoubleLine

The main advantage of trading using opposite IShares Core and SPDR DoubleLine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Core 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 Core Total and SPDR DoubleLine Total 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.