Correlation Between IShares IBoxx and SPDR Portfolio

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

Diversification Opportunities for IShares IBoxx and SPDR Portfolio

1.0

Correlation Coefficient

IShares IBoxx  SPDR Portfolio

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

Pair Corralation between IShares IBoxx and SPDR Portfolio

Considering the 90-day investment horizon IShares IBoxx is expected to generate 7.5 times less return on investment than SPDR Portfolio. In addition to that, IShares IBoxx is 1.24 times more volatile than SPDR Portfolio Corporate. It trades about 0.0 of its total potential returns per unit of risk. SPDR Portfolio Corporate is currently generating about 0.02 per unit of volatility. If you would invest  2,935  in SPDR Portfolio Corporate on September 3, 2024 and sell it today you would earn a total of  13.00  from holding SPDR Portfolio Corporate or generate 0.44% return on investment over 90 days.

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

iShares iBoxx Investment  vs.  SPDR Portfolio Corporate

iShares iBoxx Investment

Risk-Adjusted Performance

0 of 100

Very Weak

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

SPDR Portfolio Corporate

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Portfolio Corporate are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental drivers, SPDR Portfolio is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with IShares IBoxx and SPDR Portfolio

The main advantage of trading using opposite IShares IBoxx and SPDR Portfolio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares IBoxx 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 iBoxx Investment and SPDR Portfolio Corporate 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.