Correlation Between IShares Short and SPDR SSgA

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

Diversification Opportunities for IShares Short and SPDR SSgA

0.89
  Correlation Coefficient

Very poor diversification

The 3 months correlation between IShares and SPDR is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding IShares Short Maturity and SPDR SSgA Ultra in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SSgA Ultra and IShares Short 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 Short Maturity are associated (or correlated) with SPDR SSgA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SSgA Ultra has no effect on the direction of IShares Short i.e., IShares Short and SPDR SSgA go up and down completely randomly.

Pair Corralation between IShares Short and SPDR SSgA

Given the investment horizon of 90 days IShares Short Maturity is expected to generate 2.43 times more return on investment than SPDR SSgA. However, IShares Short is 2.43 times more volatile than SPDR SSgA Ultra. It trades about 0.13 of its potential returns per unit of risk. SPDR SSgA Ultra is currently generating about 0.29 per unit of risk. If you would invest  4,617  in IShares Short Maturity on December 29, 2023 and sell it today you would earn a total of  429.00  from holding IShares Short Maturity or generate 9.29% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy99.8%
ValuesDaily Returns

IShares Short Maturity  vs.  SPDR SSgA Ultra

 Performance 
       Timeline  
IShares Short Maturity 

Risk-Adjusted Performance

8 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in IShares Short Maturity are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, IShares Short is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.
SPDR SSgA Ultra 

Risk-Adjusted Performance

27 of 100

 
Low
 
High
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SSgA Ultra are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, SPDR SSgA is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

IShares Short and SPDR SSgA Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with IShares Short and SPDR SSgA

The main advantage of trading using opposite IShares Short and SPDR SSgA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Short position performs unexpectedly, SPDR SSgA 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 SSgA will offset losses from the drop in SPDR SSgA's long position.
The idea behind IShares Short Maturity and SPDR SSgA Ultra 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.

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