Correlation Between SPDR ICE and IShares Preferred

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

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

Diversification Opportunities for SPDR ICE and IShares Preferred

0.7

Correlation Coefficient

SPDR ICE  IShares Preferred

Poor diversification

The 3 months correlation between SPDR and IShares is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding SPDR ICE Preferred and iShares Preferred and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Preferred and SPDR ICE 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 SPDR ICE Preferred are associated (or correlated) with IShares Preferred. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Preferred has no effect on the direction of SPDR ICE i.e., SPDR ICE and IShares Preferred go up and down completely randomly.

Pair Corralation between SPDR ICE and IShares Preferred

Considering the 90-day investment horizon SPDR ICE Preferred is expected to generate 1.17 times more return on investment than IShares Preferred. However, SPDR ICE is 1.17 times more volatile than iShares Preferred and. It trades about 0.03 of its potential returns per unit of risk. iShares Preferred and is currently generating about 0.02 per unit of risk. If you would invest  3,240  in SPDR ICE Preferred on December 27, 2024 and sell it today you would earn a total of  34.00  from holding SPDR ICE Preferred or generate 1.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

SPDR ICE Preferred  vs.  iShares Preferred and

SPDR ICE Preferred

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR ICE Preferred are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, SPDR ICE is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

iShares Preferred

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Preferred and are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, IShares Preferred is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with SPDR ICE and IShares Preferred

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

The idea behind SPDR ICE Preferred and iShares Preferred and 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.