Correlation Between IShares 25 and SPDR Barclays

Can any of the company-specific risk be diversified away by investing in both IShares 25 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 25 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 25 Year and SPDR Barclays Intermediate, you can compare the effects of market volatilities on IShares 25 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 25 with a short position of SPDR Barclays. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares 25 and SPDR Barclays.

Diversification Opportunities for IShares 25 and SPDR Barclays

0.7

Correlation Coefficient

IShares 25  SPDR Barclays

Poor diversification

The 3 months correlation between IShares and SPDR is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding iShares 25 Year and SPDR Barclays Intermediate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Barclays Interm and IShares 25 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 25 Year 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 Interm has no effect on the direction of IShares 25 i.e., IShares 25 and SPDR Barclays go up and down completely randomly.

Pair Corralation between IShares 25 and SPDR Barclays

Given the investment horizon of 90 days iShares 25 Year is expected to under-perform the SPDR Barclays. In addition to that, IShares 25 is 4.25 times more volatile than SPDR Barclays Intermediate. It trades about -0.2 of its total potential returns per unit of risk. SPDR Barclays Intermediate is currently generating about -0.05 per unit of volatility. If you would invest  3,234  in SPDR Barclays Intermediate on February 3, 2024 and sell it today you would lose (12.00) from holding SPDR Barclays Intermediate or give up 0.37% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.65%
Values	Daily Returns

iShares 25 Year  vs.  SPDR Barclays Intermediate

iShares 25 Year

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares 25 Year has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Etf's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

SPDR Barclays Interm

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR Barclays Intermediate has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward indicators, SPDR Barclays is not utilizing all of its potentials. The new stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IShares 25 and SPDR Barclays

The main advantage of trading using opposite IShares 25 and SPDR Barclays positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares 25 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 25 Year and SPDR Barclays Intermediate 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.