Correlation Between IShares 1 and IShares Convertible
Can any of the company-specific risk be diversified away by investing in both IShares 1 and IShares Convertible 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 1 and IShares Convertible into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares 1 10Yr Laddered and iShares Convertible Bond, you can compare the effects of market volatilities on IShares 1 and IShares Convertible 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 1 with a short position of IShares Convertible. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares 1 and IShares Convertible.
Diversification Opportunities for IShares 1 and IShares Convertible
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between IShares and IShares is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding iShares 1 10Yr Laddered and iShares Convertible Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Convertible Bond and IShares 1 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 1 10Yr Laddered are associated (or correlated) with IShares Convertible. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Convertible Bond has no effect on the direction of IShares 1 i.e., IShares 1 and IShares Convertible go up and down completely randomly.
Pair Corralation between IShares 1 and IShares Convertible
Assuming the 90 days trading horizon IShares 1 is expected to generate 1.81 times less return on investment than IShares Convertible. But when comparing it to its historical volatility, iShares 1 10Yr Laddered is 2.95 times less risky than IShares Convertible. It trades about 0.07 of its potential returns per unit of risk. iShares Convertible Bond is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1,544 in iShares Convertible Bond on August 26, 2024 and sell it today you would earn a total of 189.00 from holding iShares Convertible Bond or generate 12.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares 1 10Yr Laddered vs. iShares Convertible Bond
Performance |
| Timeline |
| iShares 1 10Yr |
| iShares Convertible Bond |
IShares 1 and IShares Convertible Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares 1 and IShares Convertible
The main advantage of trading using opposite IShares 1 and IShares Convertible positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares 1 position performs unexpectedly, IShares Convertible 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 Convertible will offset losses from the drop in IShares Convertible's long position.| IShares 1 vs. Franklin Global Aggregate | IShares 1 vs. Franklin Large Cap | IShares 1 vs. First Trust Senior | IShares 1 vs. BMO Aggregate Bond |
| IShares Convertible vs. BMO Mid Federal | IShares Convertible vs. BMO Short Corporate | IShares Convertible vs. BMO Emerging Markets | IShares Convertible vs. BMO Long Corporate |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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