Correlation Between SPDR Kensho and IShares Infrastructure

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

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

Diversification Opportunities for SPDR Kensho and IShares Infrastructure

0.57

Correlation Coefficient

SPDR Kensho  IShares Infrastructure

Very weak diversification

The 3 months correlation between SPDR and IShares is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Kensho Intelligent and iShares Infrastructure ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Infrastructure and SPDR Kensho 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 Kensho Intelligent are associated (or correlated) with IShares Infrastructure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Infrastructure has no effect on the direction of SPDR Kensho i.e., SPDR Kensho and IShares Infrastructure go up and down completely randomly.

Pair Corralation between SPDR Kensho and IShares Infrastructure

Given the investment horizon of 90 days SPDR Kensho Intelligent is expected to under-perform the IShares Infrastructure. In addition to that, SPDR Kensho is 1.08 times more volatile than iShares Infrastructure ETF. It trades about -0.09 of its total potential returns per unit of risk. iShares Infrastructure ETF is currently generating about -0.01 per unit of volatility. If you would invest  4,612  in iShares Infrastructure ETF on December 27, 2024 and sell it today you would lose (52.00) from holding iShares Infrastructure ETF or give up 1.13% of portfolio value over 90 days.

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

SPDR Kensho Intelligent  vs.  iShares Infrastructure ETF

SPDR Kensho Intelligent

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR Kensho Intelligent has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Etf's forward indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the Etf traders.

iShares Infrastructure

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Infrastructure ETF has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, IShares Infrastructure is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with SPDR Kensho and IShares Infrastructure

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

The idea behind SPDR Kensho Intelligent and iShares Infrastructure ETF 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.