Correlation Between SPDR Bloomberg and IShares Preferred

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

Diversification Opportunities for SPDR Bloomberg and IShares Preferred

SPDRISharesDiversified AwaySPDRISharesDiversified Away100%
0.3
  Correlation Coefficient

Weak diversification

The 3 months correlation between SPDR and IShares is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Bloomberg High and iShares Preferred and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Preferred and SPDR Bloomberg 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 SPDR Bloomberg High are associated (or correlated) with IShares Preferred. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Preferred has no effect on the direction of SPDR Bloomberg i.e., SPDR Bloomberg and IShares Preferred go up and down completely randomly.

Pair Corralation between SPDR Bloomberg and IShares Preferred

Considering the 90-day investment horizon SPDR Bloomberg High is expected to generate 0.54 times more return on investment than IShares Preferred. However, SPDR Bloomberg High is 1.85 times less risky than IShares Preferred. It trades about 0.11 of its potential returns per unit of risk. iShares Preferred and is currently generating about 0.04 per unit of risk. If you would invest  8,020  in SPDR Bloomberg High on November 26, 2024 and sell it today you would earn a total of  1,652  from holding SPDR Bloomberg High or generate 20.6% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

SPDR Bloomberg High  vs.  iShares Preferred and

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -4-3-2-101
JavaScript chart by amCharts 3.21.15JNK PFF
       Timeline  
SPDR Bloomberg High 

Risk-Adjusted Performance

OK

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Bloomberg High are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, SPDR Bloomberg is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb94.59595.59696.5
iShares Preferred 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days iShares Preferred and has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, IShares Preferred is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb3131.53232.5

SPDR Bloomberg and IShares Preferred Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-0.8-0.55-0.3-0.0842-0.003510.08160.30.550.81.05 12345
JavaScript chart by amCharts 3.21.15JNK PFF
       Returns  

Pair Trading with SPDR Bloomberg and IShares Preferred

The main advantage of trading using opposite SPDR Bloomberg and IShares Preferred positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR Bloomberg position performs unexpectedly, IShares Preferred 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 IShares Preferred will offset losses from the drop in IShares Preferred's long position.
The idea behind SPDR Bloomberg High and iShares Preferred and 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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