Correlation Between IShares Agency and IShares Intermediate
Can any of the company-specific risk be diversified away by investing in both IShares Agency and IShares Intermediate 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 Agency and IShares Intermediate into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Agency Bond and iShares Intermediate GovernmentCredit, you can compare the effects of market volatilities on IShares Agency and IShares Intermediate 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 Agency with a short position of IShares Intermediate. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Agency and IShares Intermediate.
Diversification Opportunities for IShares Agency and IShares Intermediate
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between IShares and IShares is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding iShares Agency Bond and iShares Intermediate Governmen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Intermediate and IShares Agency 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 Agency Bond are associated (or correlated) with IShares Intermediate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Intermediate has no effect on the direction of IShares Agency i.e., IShares Agency and IShares Intermediate go up and down completely randomly.
Pair Corralation between IShares Agency and IShares Intermediate
Considering the 90-day investment horizon iShares Agency Bond is expected to generate 0.86 times more return on investment than IShares Intermediate. However, iShares Agency Bond is 1.16 times less risky than IShares Intermediate. It trades about 0.04 of its potential returns per unit of risk. iShares Intermediate GovernmentCredit is currently generating about 0.02 per unit of risk. If you would invest 10,865 in iShares Agency Bond on August 28, 2024 and sell it today you would earn a total of 17.00 from holding iShares Agency Bond or generate 0.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
iShares Agency Bond vs. iShares Intermediate Governmen
Performance |
| Timeline |
| iShares Agency Bond |
| iShares Intermediate |
IShares Agency and IShares Intermediate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Agency and IShares Intermediate
The main advantage of trading using opposite IShares Agency and IShares Intermediate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Agency position performs unexpectedly, IShares Intermediate 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 Intermediate will offset losses from the drop in IShares Intermediate's long position.| IShares Agency vs. iShares Intermediate GovernmentCredit | IShares Agency vs. iShares GovernmentCredit Bond | IShares Agency vs. iShares New York | IShares Agency vs. iShares California Muni |
| IShares Intermediate vs. iShares GovernmentCredit Bond | IShares Intermediate vs. iShares Agency Bond | IShares Intermediate vs. iShares New York | IShares Intermediate vs. iShares MBS ETF |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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