Correlation Between IShares 20 and SSGA Active

Can any of the company-specific risk be diversified away by investing in both IShares 20 and SSGA Active 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 20 and SSGA Active into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between iShares 20 Year and SSGA Active Trust, you can compare the effects of market volatilities on IShares 20 and SSGA Active 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 20 with a short position of SSGA Active. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares 20 and SSGA Active.

Diversification Opportunities for IShares 20 and SSGA Active

0.5

Correlation Coefficient

IShares 20  SSGA Active

Very weak diversification

The 3 months correlation between IShares and SSGA is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding iShares 20 Year and SSGA Active Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SSGA Active Trust and IShares 20 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 20 Year are associated (or correlated) with SSGA Active. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SSGA Active Trust has no effect on the direction of IShares 20 i.e., IShares 20 and SSGA Active go up and down completely randomly.

Pair Corralation between IShares 20 and SSGA Active

Considering the 90-day investment horizon iShares 20 Year is expected to generate 3.79 times more return on investment than SSGA Active. However, IShares 20 is 3.79 times more volatile than SSGA Active Trust. It trades about 0.06 of its potential returns per unit of risk. SSGA Active Trust is currently generating about 0.03 per unit of risk. If you would invest  8,652  in iShares 20 Year on December 27, 2024 and sell it today you would earn a total of  239.00  from holding iShares 20 Year or generate 2.76% return on investment over 90 days.

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

iShares 20 Year  vs.  SSGA Active Trust

iShares 20 Year

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares 20 Year are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, IShares 20 is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

SSGA Active Trust

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SSGA Active Trust are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental drivers, SSGA Active is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with IShares 20 and SSGA Active

The main advantage of trading using opposite IShares 20 and SSGA Active positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares 20 position performs unexpectedly, SSGA Active 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 SSGA Active will offset losses from the drop in SSGA Active's long position.

The idea behind iShares 20 Year and SSGA Active Trust 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.