Correlation Between IShares Treasury and SPDR Portfolio
Can any of the company-specific risk be diversified away by investing in both IShares Treasury and SPDR Portfolio 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 Portfolio into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Treasury Floating and SPDR Portfolio SP, you can compare the effects of market volatilities on IShares Treasury and SPDR Portfolio 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 Portfolio. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Treasury and SPDR Portfolio.
Diversification Opportunities for IShares Treasury and SPDR Portfolio
-0.53 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between IShares and SPDR is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding iShares Treasury Floating and SPDR Portfolio SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Portfolio SP 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 Floating are associated (or correlated) with SPDR Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Portfolio SP has no effect on the direction of IShares Treasury i.e., IShares Treasury and SPDR Portfolio go up and down completely randomly.
Pair Corralation between IShares Treasury and SPDR Portfolio
Given the investment horizon of 90 days iShares Treasury Floating is expected to generate 0.03 times more return on investment than SPDR Portfolio. However, iShares Treasury Floating is 39.42 times less risky than SPDR Portfolio. It trades about 0.95 of its potential returns per unit of risk. SPDR Portfolio SP is currently generating about 0.01 per unit of risk. If you would invest 5,005 in iShares Treasury Floating on November 1, 2024 and sell it today you would earn a total of 60.00 from holding iShares Treasury Floating or generate 1.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Treasury Floating vs. SPDR Portfolio SP
Performance |
| Timeline |
| iShares Treasury Floating |
| SPDR Portfolio SP |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
IShares Treasury and SPDR Portfolio Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Treasury and SPDR Portfolio
The main advantage of trading using opposite IShares Treasury and SPDR Portfolio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Treasury position performs unexpectedly, SPDR Portfolio 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 Portfolio will offset losses from the drop in SPDR Portfolio's long position.The idea behind iShares Treasury Floating and SPDR Portfolio SP 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 Portfolio vs. Invesco SP 500 | SPDR Portfolio vs. Schwab Dividend Equity | SPDR Portfolio vs. Vanguard High Dividend |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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