Correlation Between IShares International and SPDR Bloomberg
Can any of the company-specific risk be diversified away by investing in both IShares International and SPDR Bloomberg 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 International and SPDR Bloomberg into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares International Treasury and SPDR Bloomberg International, you can compare the effects of market volatilities on IShares International and SPDR Bloomberg 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 International with a short position of SPDR Bloomberg. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares International and SPDR Bloomberg.
Diversification Opportunities for IShares International and SPDR Bloomberg
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IShares and SPDR is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding iShares International Treasury and SPDR Bloomberg International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Bloomberg Inter and IShares International 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 International Treasury are associated (or correlated) with SPDR Bloomberg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Bloomberg Inter has no effect on the direction of IShares International i.e., IShares International and SPDR Bloomberg go up and down completely randomly.
Pair Corralation between IShares International and SPDR Bloomberg
Given the investment horizon of 90 days iShares International Treasury is expected to under-perform the SPDR Bloomberg. But the etf apears to be less risky and, when comparing its historical volatility, iShares International Treasury is 1.3 times less risky than SPDR Bloomberg. The etf trades about -0.21 of its potential returns per unit of risk. The SPDR Bloomberg International is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 2,853 in SPDR Bloomberg International on October 24, 2024 and sell it today you would lose (5.00) from holding SPDR Bloomberg International or give up 0.18% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares International Treasury vs. SPDR Bloomberg International
Performance |
| Timeline |
| iShares International |
| SPDR Bloomberg Inter |
IShares International and SPDR Bloomberg Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares International and SPDR Bloomberg
The main advantage of trading using opposite IShares International and SPDR Bloomberg positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares International position performs unexpectedly, SPDR Bloomberg 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 Bloomberg will offset losses from the drop in SPDR Bloomberg's long position.The idea behind iShares International Treasury and SPDR Bloomberg International 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.
| SPDR Bloomberg vs. SPDR Bloomberg Short | SPDR Bloomberg vs. Invesco International Corporate | SPDR Bloomberg vs. SPDR Bloomberg Emerging | SPDR Bloomberg vs. SPDR Nuveen Bloomberg |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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