Correlation Between SPDR Barclays and IShares Interest

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

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

Diversification Opportunities for SPDR Barclays and IShares Interest

0.86

Correlation Coefficient

SPDR Barclays  IShares Interest

Very poor diversification

The 3 months correlation between SPDR and IShares is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Barclays Short and iShares Interest Rate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Interest Rate and SPDR Barclays 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 Barclays Short are associated (or correlated) with IShares Interest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Interest Rate has no effect on the direction of SPDR Barclays i.e., SPDR Barclays and IShares Interest go up and down completely randomly.

Pair Corralation between SPDR Barclays and IShares Interest

Given the investment horizon of 90 days SPDR Barclays Short is expected to generate 0.7 times more return on investment than IShares Interest. However, SPDR Barclays Short is 1.42 times less risky than IShares Interest. It trades about 0.2 of its potential returns per unit of risk. iShares Interest Rate is currently generating about 0.1 per unit of risk. If you would invest  2,880  in SPDR Barclays Short on December 3, 2024 and sell it today you would earn a total of  33.00  from holding SPDR Barclays Short or generate 1.15% return on investment over 90 days.

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

SPDR Barclays Short  vs.  iShares Interest Rate

SPDR Barclays Short

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Barclays Short are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, SPDR Barclays is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

iShares Interest Rate

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Interest Rate are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental indicators, IShares Interest is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with SPDR Barclays and IShares Interest

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

The idea behind SPDR Barclays Short and iShares Interest Rate 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.