Correlation Between IShares Treasury and SPDR SP
Can any of the company-specific risk be diversified away by investing in both IShares Treasury and SPDR 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 Treasury and SPDR SP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Treasury Bond and SPDR SP Materials, you can compare the effects of market volatilities on IShares Treasury and SPDR 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 Treasury with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Treasury and SPDR SP.
Diversification Opportunities for IShares Treasury and SPDR SP
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between IShares and SPDR is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding iShares Treasury Bond and SPDR SP Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Materials and IShares Treasury 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 Treasury Bond are associated (or correlated) with SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP Materials has no effect on the direction of IShares Treasury i.e., IShares Treasury and SPDR SP go up and down completely randomly.
Pair Corralation between IShares Treasury and SPDR SP
Assuming the 90 days trading horizon iShares Treasury Bond is expected to generate 1.38 times more return on investment than SPDR SP. However, IShares Treasury is 1.38 times more volatile than SPDR SP Materials. It trades about 0.08 of its potential returns per unit of risk. SPDR SP Materials is currently generating about -0.02 per unit of risk. If you would invest 457.00 in iShares Treasury Bond on August 29, 2024 and sell it today you would earn a total of 8.00 from holding iShares Treasury Bond or generate 1.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Treasury Bond vs. SPDR SP Materials
Performance |
| Timeline |
| iShares Treasury Bond |
| SPDR SP Materials |
IShares Treasury and SPDR SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Treasury and SPDR SP
The main advantage of trading using opposite IShares Treasury and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Treasury position performs unexpectedly, SPDR 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 SPDR SP will offset losses from the drop in SPDR SP's long position.| IShares Treasury vs. iShares MSCI Japan | IShares Treasury vs. iShares JP Morgan | IShares Treasury vs. iShares MSCI Europe | IShares Treasury vs. iShares Nasdaq Biotechnology |
| SPDR SP vs. SPDR Dow Jones | SPDR SP vs. SPDR SP Dividend | SPDR SP vs. SPDR Barclays Euro | SPDR SP vs. SPDR SP Consumer |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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