Correlation Between IShares Morningstar and SPDR SSgA

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

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

Diversification Opportunities for IShares Morningstar and SPDR SSgA

0.77

Correlation Coefficient

IShares Morningstar  SPDR SSgA

Poor diversification

The 3 months correlation between IShares and SPDR is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding iShares Morningstar Multi Asse and SPDR SSgA Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SSgA Income and IShares Morningstar 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 Morningstar Multi Asset are associated (or correlated) with SPDR SSgA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SSgA Income has no effect on the direction of IShares Morningstar i.e., IShares Morningstar and SPDR SSgA go up and down completely randomly.

Pair Corralation between IShares Morningstar and SPDR SSgA

Given the investment horizon of 90 days iShares Morningstar Multi Asset is expected to under-perform the SPDR SSgA. But the etf apears to be less risky and, when comparing its historical volatility, iShares Morningstar Multi Asset is 1.22 times less risky than SPDR SSgA. The etf trades about -0.15 of its potential returns per unit of risk. The SPDR SSgA Income is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  3,183  in SPDR SSgA Income on October 10, 2024 and sell it today you would lose (54.00) from holding SPDR SSgA Income or give up 1.7% of portfolio value over 90 days.

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

iShares Morningstar Multi Asse  vs.  SPDR SSgA Income

iShares Morningstar

Risk-Adjusted Performance

0 of 100

Very Weak

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

SPDR SSgA Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR SSgA Income has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward-looking signals, SPDR SSgA is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with IShares Morningstar and SPDR SSgA

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

The idea behind iShares Morningstar Multi Asset and SPDR SSgA Income 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.