Correlation Between IShares Treasury and SPDR Barclays

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

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

Diversification Opportunities for IShares Treasury and SPDR Barclays

-0.53

Correlation Coefficient

IShares Treasury  SPDR Barclays

Excellent diversification

The 3 months correlation between IShares and SPDR is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding iShares Treasury Floating and SPDR Barclays Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Barclays Short and IShares Treasury 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 iShares Treasury Floating are associated (or correlated) with SPDR Barclays. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Barclays Short has no effect on the direction of IShares Treasury i.e., IShares Treasury and SPDR Barclays go up and down completely randomly.

Pair Corralation between IShares Treasury and SPDR Barclays

Given the investment horizon of 90 days iShares Treasury Floating is expected to generate 0.18 times more return on investment than SPDR Barclays. However, iShares Treasury Floating is 5.46 times less risky than SPDR Barclays. It trades about 1.1 of its potential returns per unit of risk. SPDR Barclays Short is currently generating about -0.02 per unit of risk. If you would invest  4,993  in iShares Treasury Floating on September 13, 2024 and sell it today you would earn a total of  59.00  from holding iShares Treasury Floating or generate 1.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

iShares Treasury Floating  vs.  SPDR Barclays Short

iShares Treasury Floating

Risk-Adjusted Performance

86 of 100

Market Crasher

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Treasury Floating are ranked lower than 86 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy essential indicators, IShares Treasury is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

SPDR Barclays Short

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR Barclays Short has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Pair Trading with IShares Treasury and SPDR Barclays

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

The idea behind iShares Treasury Floating and SPDR Barclays Short 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.

Check out your portfolio center.

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.