Correlation Between IShares Core and SPDR Barclays

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

Diversification Opportunities for IShares Core and SPDR Barclays

0.81

Correlation Coefficient

IShares Core  SPDR Barclays

Very poor diversification

The 3 months correlation between IShares and SPDR is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core MSCI and SPDR Barclays Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Barclays Short and IShares Core 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 Core MSCI 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 Short has no effect on the direction of IShares Core i.e., IShares Core and SPDR Barclays go up and down completely randomly.

Pair Corralation between IShares Core and SPDR Barclays

Given the investment horizon of 90 days iShares Core MSCI is expected to generate 6.69 times more return on investment than SPDR Barclays. However, IShares Core is 6.69 times more volatile than SPDR Barclays Short. It trades about 0.05 of its potential returns per unit of risk. SPDR Barclays Short is currently generating about 0.13 per unit of risk. If you would invest  6,768  in iShares Core MSCI on March 12, 2024 and sell it today you would earn a total of  123.00  from holding iShares Core MSCI or generate 1.82% return on investment over 90 days.

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

iShares Core MSCI  vs.  SPDR Barclays Short

iShares Core MSCI

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core MSCI are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, IShares Core is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

SPDR Barclays Short

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Barclays Short are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, SPDR Barclays is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IShares Core and SPDR Barclays

The main advantage of trading using opposite IShares Core and SPDR Barclays positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Core 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 Core MSCI and SPDR Barclays Short 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.