Correlation Between IShares Trust and SSGA SP

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Can any of the company-specific risk be diversified away by investing in both IShares Trust and SSGA SP 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 SSGA SP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IShares Trust - and SSGA SP 500, you can compare the effects of market volatilities on IShares Trust and SSGA SP 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 SSGA SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Trust and SSGA SP.

Diversification Opportunities for IShares Trust and SSGA SP

0.4
  Correlation Coefficient

Very weak diversification

The 3 months correlation between IShares and SVSPX is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding IShares Trust - and SSGA SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SSGA SP 500 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 SSGA SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SSGA SP 500 has no effect on the direction of IShares Trust i.e., IShares Trust and SSGA SP go up and down completely randomly.

Pair Corralation between IShares Trust and SSGA SP

Given the investment horizon of 90 days IShares Trust is expected to generate 1.5 times less return on investment than SSGA SP. But when comparing it to its historical volatility, IShares Trust - is 3.03 times less risky than SSGA SP. It trades about 0.59 of its potential returns per unit of risk. SSGA SP 500 is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  20,171  in SSGA SP 500 on October 30, 2022 and sell it today you would earn a total of  1,180  from holding SSGA SP 500 or generate 5.85% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy95.24%
ValuesDaily Returns

IShares Trust -  vs.  SSGA SP 500

 Performance (%) 
       Timeline  
IShares Trust - 
IShares Performance
13 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in IShares Trust - are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable technical and fundamental indicators, IShares Trust is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

IShares Price Channel

SSGA SP 500 
SVSPX Performance
4 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in SSGA SP 500 are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, SSGA SP may actually be approaching a critical reversion point that can send shares even higher in February 2023.

SVSPX Price Channel

IShares Trust and SSGA SP Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with IShares Trust and SSGA SP

The main advantage of trading using opposite IShares Trust and SSGA SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Trust position performs unexpectedly, SSGA SP 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 SSGA SP will offset losses from the drop in SSGA SP's long position.
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The idea behind IShares Trust - and SSGA SP 500 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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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .

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