Correlation Between SPDR Bloomberg and IShares IBoxx

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

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

Diversification Opportunities for SPDR Bloomberg and IShares IBoxx

0.99

Correlation Coefficient

SPDR Bloomberg  IShares IBoxx

No risk reduction

The 3 months correlation between SPDR and IShares is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Bloomberg Short and iShares iBoxx High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares iBoxx High and SPDR Bloomberg 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 Bloomberg Short are associated (or correlated) with IShares IBoxx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares iBoxx High has no effect on the direction of SPDR Bloomberg i.e., SPDR Bloomberg and IShares IBoxx go up and down completely randomly.

Pair Corralation between SPDR Bloomberg and IShares IBoxx

Given the investment horizon of 90 days SPDR Bloomberg is expected to generate 1.23 times less return on investment than IShares IBoxx. But when comparing it to its historical volatility, SPDR Bloomberg Short is 1.11 times less risky than IShares IBoxx. It trades about 0.07 of its potential returns per unit of risk. iShares iBoxx High is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  7,794  in iShares iBoxx High on December 28, 2024 and sell it today you would earn a total of  100.00  from holding iShares iBoxx High or generate 1.28% return on investment over 90 days.

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

SPDR Bloomberg Short  vs.  iShares iBoxx High

SPDR Bloomberg Short

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Bloomberg Short are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, SPDR Bloomberg is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

iShares iBoxx High

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares iBoxx High are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, IShares IBoxx is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with SPDR Bloomberg and IShares IBoxx

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

The idea behind SPDR Bloomberg Short and iShares iBoxx High 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 Global Correlations module to find global opportunities by holding instruments from different markets.