Correlation Between IShares Trust and SPDR Portfolio

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

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

Diversification Opportunities for IShares Trust and SPDR Portfolio

-0.71

Correlation Coefficient

IShares Trust  SPDR Portfolio

Pay attention - limited upside

The 3 months correlation between IShares and SPDR is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding iShares Trust and SPDR Portfolio SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Portfolio SP and IShares Trust 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 Trust are associated (or correlated) with SPDR Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Portfolio SP has no effect on the direction of IShares Trust i.e., IShares Trust and SPDR Portfolio go up and down completely randomly.

Pair Corralation between IShares Trust and SPDR Portfolio

Assuming the 90 days trading horizon iShares Trust is expected to under-perform the SPDR Portfolio. But the etf apears to be less risky and, when comparing its historical volatility, iShares Trust is 1.63 times less risky than SPDR Portfolio. The etf trades about -0.12 of its potential returns per unit of risk. The SPDR Portfolio SP is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  118,449  in SPDR Portfolio SP on April 20, 2025 and sell it today you would earn a total of  19,723  from holding SPDR Portfolio SP or generate 16.65% return on investment over 90 days.

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

iShares Trust   vs.  SPDR Portfolio SP

iShares Trust

Risk-Adjusted Performance

Very Weak

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

SPDR Portfolio SP

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Portfolio SP are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, SPDR Portfolio showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares Trust and SPDR Portfolio

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

The idea behind iShares Trust and SPDR Portfolio SP 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.

Check out your portfolio center.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.