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

0.82

Correlation Coefficient

IShares International  SPDR Bloomberg

Very poor diversification

The 3 months correlation between IShares and SPDR is 0.82. 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. In addition to that, IShares International is 1.06 times more volatile than SPDR Bloomberg International. It trades about -0.2 of its total potential returns per unit of risk. SPDR Bloomberg International is currently generating about -0.15 per unit of volatility. If you would invest  2,888  in SPDR Bloomberg International on February 1, 2024 and sell it today you would lose (49.00) from holding SPDR Bloomberg International or give up 1.7% 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

iShares International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares International Treasury has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, IShares International is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

SPDR Bloomberg Inter

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR Bloomberg International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, SPDR Bloomberg is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

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.

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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.