Correlation Between FlexShares IBoxx and SPDR Portfolio

Can any of the company-specific risk be diversified away by investing in both FlexShares IBoxx 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 FlexShares IBoxx and SPDR Portfolio into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between FlexShares iBoxx 5 Year and SPDR Portfolio TIPS, you can compare the effects of market volatilities on FlexShares IBoxx 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 FlexShares IBoxx with a short position of SPDR Portfolio. Check out your portfolio center. Please also check ongoing floating volatility patterns of FlexShares IBoxx and SPDR Portfolio.

Diversification Opportunities for FlexShares IBoxx and SPDR Portfolio

0.97

Correlation Coefficient

FlexShares IBoxx  SPDR Portfolio

Almost no diversification

The 3 months correlation between FlexShares and SPDR is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding FlexShares iBoxx 5 Year and SPDR Portfolio TIPS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Portfolio TIPS and FlexShares IBoxx 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 FlexShares iBoxx 5 Year 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 TIPS has no effect on the direction of FlexShares IBoxx i.e., FlexShares IBoxx and SPDR Portfolio go up and down completely randomly.

Pair Corralation between FlexShares IBoxx and SPDR Portfolio

Given the investment horizon of 90 days FlexShares iBoxx 5 Year is expected to generate 0.89 times more return on investment than SPDR Portfolio. However, FlexShares iBoxx 5 Year is 1.12 times less risky than SPDR Portfolio. It trades about 0.1 of its potential returns per unit of risk. SPDR Portfolio TIPS is currently generating about 0.07 per unit of risk. If you would invest  2,378  in FlexShares iBoxx 5 Year on May 1, 2025 and sell it today you would earn a total of  37.00  from holding FlexShares iBoxx 5 Year or generate 1.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

FlexShares iBoxx 5 Year  vs.  SPDR Portfolio TIPS

FlexShares iBoxx 5

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in FlexShares iBoxx 5 Year are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, FlexShares IBoxx is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

SPDR Portfolio TIPS

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Portfolio TIPS are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable forward indicators, SPDR Portfolio is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with FlexShares IBoxx and SPDR Portfolio

The main advantage of trading using opposite FlexShares IBoxx and SPDR Portfolio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FlexShares IBoxx 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 FlexShares iBoxx 5 Year and SPDR Portfolio TIPS 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.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.