Correlation Between SPDR Barclays and International Business

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

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

Diversification Opportunities for SPDR Barclays and International Business

0.57

Correlation Coefficient

SPDR Barclays  International Business

Very weak diversification

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

Pair Corralation between SPDR Barclays and International Business

Given the investment horizon of 90 days SPDR Barclays Intermediate is expected to generate 0.14 times more return on investment than International Business. However, SPDR Barclays Intermediate is 7.21 times less risky than International Business. It trades about -0.22 of its potential returns per unit of risk. International Business Machines is currently generating about -0.31 per unit of risk. If you would invest  3,257  in SPDR Barclays Intermediate on January 28, 2024 and sell it today you would lose (41.00) from holding SPDR Barclays Intermediate or give up 1.26% of portfolio value over 90 days.

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

SPDR Barclays Intermediate  vs.  International Business Machine

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 newest stock price disturbance, may contribute to short-term losses for the investors.

International Business

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days International Business Machines has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's fundamental drivers remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with SPDR Barclays and International Business

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

The idea behind SPDR Barclays Intermediate and International Business Machines 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.