Correlation Between IShares National and SPDR Nuveen

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

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

Diversification Opportunities for IShares National and SPDR Nuveen

0.95

Correlation Coefficient

IShares National  SPDR Nuveen

Almost no diversification

The 3 months correlation between IShares and SPDR is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding iShares National Muni and SPDR Nuveen Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Nuveen Municipal and IShares National 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 National Muni are associated (or correlated) with SPDR Nuveen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Nuveen Municipal has no effect on the direction of IShares National i.e., IShares National and SPDR Nuveen go up and down completely randomly.

Pair Corralation between IShares National and SPDR Nuveen

Considering the 90-day investment horizon iShares National Muni is expected to generate 1.18 times more return on investment than SPDR Nuveen. However, IShares National is 1.18 times more volatile than SPDR Nuveen Municipal. It trades about 0.07 of its potential returns per unit of risk. SPDR Nuveen Municipal is currently generating about 0.08 per unit of risk. If you would invest  10,716  in iShares National Muni on September 1, 2024 and sell it today you would earn a total of  138.00  from holding iShares National Muni or generate 1.29% return on investment over 90 days.

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

iShares National Muni  vs.  SPDR Nuveen Municipal

iShares National Muni

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares National Muni are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, IShares National is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

SPDR Nuveen Municipal

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Nuveen Municipal are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, SPDR Nuveen is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with IShares National and SPDR Nuveen

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

The idea behind iShares National Muni and SPDR Nuveen Municipal 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.