Correlation Between SPDR SP and IShares IBonds

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

By analyzing existing cross correlation between SPDR SP 500 and iShares iBonds 2028, you can compare the effects of market volatilities on SPDR SP and IShares IBonds 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 SP with a short position of IShares IBonds. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and IShares IBonds.

Diversification Opportunities for SPDR SP and IShares IBonds

0.82

Correlation Coefficient

SPDR SP  IShares IBonds

Very poor diversification

The 3 months correlation between SPDR and IShares is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP 500 and iShares iBonds 2028 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares iBonds 2028 and SPDR SP 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 SP 500 are associated (or correlated) with IShares IBonds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares iBonds 2028 has no effect on the direction of SPDR SP i.e., SPDR SP and IShares IBonds go up and down completely randomly.

Pair Corralation between SPDR SP and IShares IBonds

Considering the 90-day investment horizon SPDR SP 500 is expected to generate 2.89 times more return on investment than IShares IBonds. However, SPDR SP is 2.89 times more volatile than iShares iBonds 2028. It trades about 0.06 of its potential returns per unit of risk. iShares iBonds 2028 is currently generating about -0.05 per unit of risk. If you would invest  59,553  in SPDR SP 500 on September 25, 2024 and sell it today you would earn a total of  577.00  from holding SPDR SP 500 or generate 0.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.24%
Values	Daily Returns

SPDR SP 500  vs.  iShares iBonds 2028

SPDR SP 500

Risk-Adjusted Performance

9 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP 500 are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, SPDR SP is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

iShares iBonds 2028

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares iBonds 2028 are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical indicators, IShares IBonds is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with SPDR SP and IShares IBonds

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

The idea behind SPDR SP 500 and iShares iBonds 2028 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.