Correlation Between SPDR Barclays and IShares BBB
Can any of the company-specific risk be diversified away by investing in both SPDR Barclays and IShares BBB 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 Barclays and IShares BBB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR Barclays Intermediate and iShares BBB Rated, you can compare the effects of market volatilities on SPDR Barclays and IShares BBB 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 Barclays with a short position of IShares BBB. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Barclays and IShares BBB.
Diversification Opportunities for SPDR Barclays and IShares BBB
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between SPDR and IShares is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Barclays Intermediate and iShares BBB Rated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares BBB Rated and SPDR Barclays 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 Barclays Intermediate are associated (or correlated) with IShares BBB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares BBB Rated has no effect on the direction of SPDR Barclays i.e., SPDR Barclays and IShares BBB go up and down completely randomly.
Pair Corralation between SPDR Barclays and IShares BBB
Given the investment horizon of 90 days SPDR Barclays is expected to generate 2.45 times less return on investment than IShares BBB. But when comparing it to its historical volatility, SPDR Barclays Intermediate is 1.73 times less risky than IShares BBB. It trades about 0.07 of its potential returns per unit of risk. iShares BBB Rated is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 8,606 in iShares BBB Rated on August 30, 2024 and sell it today you would earn a total of 83.00 from holding iShares BBB Rated or generate 0.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR Barclays Intermediate vs. iShares BBB Rated
Performance |
| Timeline |
| SPDR Barclays Interm |
| iShares BBB Rated |
SPDR Barclays and IShares BBB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR Barclays and IShares BBB
The main advantage of trading using opposite SPDR Barclays and IShares BBB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR Barclays position performs unexpectedly, IShares BBB 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 BBB will offset losses from the drop in IShares BBB's long position.| SPDR Barclays vs. SPDR Barclays Short | SPDR Barclays vs. SPDR Bloomberg Emerging | SPDR Barclays vs. SPDR Barclays Long | SPDR Barclays vs. SPDR Barclays Short |
| IShares BBB vs. iShares BB Rated | IShares BBB vs. iShares Aaa | IShares BBB vs. iShares Edge Investment | IShares BBB vs. BlackRock Intermediate Muni |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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