Correlation Between SPDR Portfolio and IShares Core

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

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

Diversification Opportunities for SPDR Portfolio and IShares Core

0.17

Correlation Coefficient

SPDR Portfolio  IShares Core

Average diversification

The 3 months correlation between SPDR and IShares is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Portfolio SP and iShares Core High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core High and SPDR Portfolio 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 Portfolio SP are associated (or correlated) with IShares Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Core High has no effect on the direction of SPDR Portfolio i.e., SPDR Portfolio and IShares Core go up and down completely randomly.

Pair Corralation between SPDR Portfolio and IShares Core

Given the investment horizon of 90 days SPDR Portfolio is expected to generate 7.15 times less return on investment than IShares Core. But when comparing it to its historical volatility, SPDR Portfolio SP is 1.01 times less risky than IShares Core. It trades about 0.02 of its potential returns per unit of risk. iShares Core High is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  11,088  in iShares Core High on December 28, 2024 and sell it today you would earn a total of  866.00  from holding iShares Core High or generate 7.81% return on investment over 90 days.

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

SPDR Portfolio SP  vs.  iShares Core High

SPDR Portfolio SP

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Portfolio SP are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, SPDR Portfolio is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

iShares Core High

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core High are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating fundamental indicators, IShares Core may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with SPDR Portfolio and IShares Core

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

The idea behind SPDR Portfolio SP and iShares Core 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.