Correlation Between IShares Core and SPDR Portfolio

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

Diversification Opportunities for IShares Core and SPDR Portfolio

-0.5

Correlation Coefficient

IShares Core  SPDR Portfolio

Very good diversification

The 3 months correlation between IShares and SPDR is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SP and SPDR Portfolio TIPS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Portfolio TIPS 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 SP 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 TIPS has no effect on the direction of IShares Core i.e., IShares Core and SPDR Portfolio go up and down completely randomly.

Pair Corralation between IShares Core and SPDR Portfolio

Considering the 90-day investment horizon iShares Core SP is expected to generate 3.46 times more return on investment than SPDR Portfolio. However, IShares Core is 3.46 times more volatile than SPDR Portfolio TIPS. It trades about 0.06 of its potential returns per unit of risk. SPDR Portfolio TIPS is currently generating about -0.25 per unit of risk. If you would invest  59,812  in iShares Core SP on September 25, 2024 and sell it today you would earn a total of  624.00  from holding iShares Core SP or generate 1.04% return on investment over 90 days.

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

iShares Core SP  vs.  SPDR Portfolio TIPS

iShares Core SP

Risk-Adjusted Performance

9 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core SP are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, IShares Core is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

SPDR Portfolio TIPS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR Portfolio TIPS has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward indicators, SPDR Portfolio is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with IShares Core and SPDR Portfolio

The main advantage of trading using opposite IShares Core and SPDR Portfolio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Core 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 Core SP and SPDR Portfolio TIPS 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.