Correlation Between SSgA SPDR and IShares Core

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

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

Diversification Opportunities for SSgA SPDR and IShares Core

0.55

Correlation Coefficient

SSgA SPDR  IShares Core

Very weak diversification

The 3 months correlation between SSgA and IShares is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding SSgA SPDR ETFs and iShares Core SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core SP and SSgA SPDR 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 SSgA SPDR ETFs 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 SP has no effect on the direction of SSgA SPDR i.e., SSgA SPDR and IShares Core go up and down completely randomly.

Pair Corralation between SSgA SPDR and IShares Core

Assuming the 90 days trading horizon SSgA SPDR is expected to generate 36.48 times less return on investment than IShares Core. But when comparing it to its historical volatility, SSgA SPDR ETFs is 2.06 times less risky than IShares Core. It trades about 0.01 of its potential returns per unit of risk. iShares Core SP is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  37,453  in iShares Core SP on September 23, 2024 and sell it today you would earn a total of  23,109  from holding iShares Core SP or generate 61.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

SSgA SPDR ETFs  vs.  iShares Core SP

SSgA SPDR ETFs

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SSgA SPDR ETFs are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental drivers, SSgA SPDR is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

iShares Core SP

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core SP are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, IShares Core may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with SSgA SPDR and IShares Core

The main advantage of trading using opposite SSgA SPDR and IShares Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SSgA SPDR 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 SSgA SPDR ETFs and iShares Core SP 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.