Correlation Between IShares MBS and SPDR DoubleLine

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

Diversification Opportunities for IShares MBS and SPDR DoubleLine

0.76

Correlation Coefficient

IShares MBS  SPDR DoubleLine

Poor diversification

The 3 months correlation between IShares and SPDR is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding iShares MBS ETF and SPDR DoubleLine Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR DoubleLine Emerging and IShares MBS 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 MBS ETF 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 Emerging has no effect on the direction of IShares MBS i.e., IShares MBS and SPDR DoubleLine go up and down completely randomly.

Pair Corralation between IShares MBS and SPDR DoubleLine

Considering the 90-day investment horizon iShares MBS ETF is expected to generate 2.1 times more return on investment than SPDR DoubleLine. However, IShares MBS is 2.1 times more volatile than SPDR DoubleLine Emerging. It trades about 0.11 of its potential returns per unit of risk. SPDR DoubleLine Emerging is currently generating about -0.01 per unit of risk. If you would invest  9,193  in iShares MBS ETF on September 19, 2024 and sell it today you would earn a total of  68.00  from holding iShares MBS ETF or generate 0.74% return on investment over 90 days.

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

iShares MBS ETF  vs.  SPDR DoubleLine Emerging

iShares MBS ETF

Risk-Adjusted Performance

0 of 100

Very Weak

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

SPDR DoubleLine Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR DoubleLine Emerging 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 current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with IShares MBS and SPDR DoubleLine

The main advantage of trading using opposite IShares MBS and SPDR DoubleLine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MBS 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 MBS ETF and SPDR DoubleLine Emerging 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.