Correlation Between IShares Trust and SPDR BOFA
Can any of the company-specific risk be diversified away by investing in both IShares Trust and SPDR BOFA 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 BOFA 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 BOFA MERRILL, you can compare the effects of market volatilities on IShares Trust and SPDR BOFA 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 BOFA. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Trust and SPDR BOFA.
Diversification Opportunities for IShares Trust and SPDR BOFA
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and SPDR is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding iShares Trust and SPDR BOFA MERRILL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR BOFA MERRILL 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 BOFA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR BOFA MERRILL has no effect on the direction of IShares Trust i.e., IShares Trust and SPDR BOFA go up and down completely randomly.
Pair Corralation between IShares Trust and SPDR BOFA
Given the investment horizon of 90 days IShares Trust is expected to generate 2.27 times less return on investment than SPDR BOFA. But when comparing it to its historical volatility, iShares Trust is 1.26 times less risky than SPDR BOFA. It trades about 0.11 of its potential returns per unit of risk. SPDR BOFA MERRILL is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 1,554 in SPDR BOFA MERRILL on August 23, 2024 and sell it today you would earn a total of 265.00 from holding SPDR BOFA MERRILL or generate 17.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Trust vs. SPDR BOFA MERRILL
Performance |
| Timeline |
| iShares Trust |
| SPDR BOFA MERRILL |
IShares Trust and SPDR BOFA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Trust and SPDR BOFA
The main advantage of trading using opposite IShares Trust and SPDR BOFA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Trust position performs unexpectedly, SPDR BOFA 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 BOFA will offset losses from the drop in SPDR BOFA's long position.| IShares Trust vs. Vanguard Russell 1000 | IShares Trust vs. Vanguard Russell 2000 | IShares Trust vs. Vanguard Mega Cap | IShares Trust vs. Vanguard Russell 1000 |
| SPDR BOFA vs. Vanguard Russell 1000 | SPDR BOFA vs. Vanguard Russell 2000 | SPDR BOFA vs. Vanguard Mega Cap | SPDR BOFA vs. Vanguard Russell 1000 |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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