Correlation Between SPDR Portfolio and IShares TIPS

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

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

Diversification Opportunities for SPDR Portfolio and IShares TIPS

0.75

Correlation Coefficient

SPDR Portfolio  IShares TIPS

Poor diversification

The 3 months correlation between SPDR and IShares is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Portfolio TIPS and iShares TIPS Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares TIPS Bond and SPDR Portfolio 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 Portfolio TIPS are associated (or correlated) with IShares TIPS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares TIPS Bond has no effect on the direction of SPDR Portfolio i.e., SPDR Portfolio and IShares TIPS go up and down completely randomly.

Pair Corralation between SPDR Portfolio and IShares TIPS

Given the investment horizon of 90 days SPDR Portfolio TIPS is expected to under-perform the IShares TIPS. But the etf apears to be less risky and, when comparing its historical volatility, SPDR Portfolio TIPS is 1.11 times less risky than IShares TIPS. The etf trades about -0.03 of its potential returns per unit of risk. The iShares TIPS Bond is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  10,862  in iShares TIPS Bond on March 20, 2025 and sell it today you would earn a total of  40.00  from holding iShares TIPS Bond or generate 0.37% return on investment over 90 days.

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

SPDR Portfolio TIPS  vs.  iShares TIPS Bond

SPDR Portfolio TIPS

Risk-Adjusted Performance

Weak

Over the last 90 days SPDR Portfolio TIPS has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward indicators, SPDR Portfolio is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

iShares TIPS Bond

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares TIPS Bond are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable forward indicators, IShares TIPS is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with SPDR Portfolio and IShares TIPS

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

The idea behind SPDR Portfolio TIPS and iShares TIPS Bond 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.