Correlation Between IShares JP and IShares CMBS
Can any of the company-specific risk be diversified away by investing in both IShares JP and IShares CMBS 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 JP and IShares CMBS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares JP Morgan and iShares CMBS ETF, you can compare the effects of market volatilities on IShares JP and IShares CMBS 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 JP with a short position of IShares CMBS. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares JP and IShares CMBS.
Diversification Opportunities for IShares JP and IShares CMBS
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between IShares and IShares is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding iShares JP Morgan and iShares CMBS ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares CMBS ETF and IShares JP 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 JP Morgan are associated (or correlated) with IShares CMBS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares CMBS ETF has no effect on the direction of IShares JP i.e., IShares JP and IShares CMBS go up and down completely randomly.
Pair Corralation between IShares JP and IShares CMBS
Given the investment horizon of 90 days IShares JP is expected to generate 1.73 times less return on investment than IShares CMBS. But when comparing it to its historical volatility, iShares JP Morgan is 1.25 times less risky than IShares CMBS. It trades about 0.06 of its potential returns per unit of risk. iShares CMBS ETF is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 4,693 in iShares CMBS ETF on November 1, 2024 and sell it today you would earn a total of 64.00 from holding iShares CMBS ETF or generate 1.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares JP Morgan vs. iShares CMBS ETF
Performance |
| Timeline |
| iShares JP Morgan |
| iShares CMBS ETF |
IShares JP and IShares CMBS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares JP and IShares CMBS
The main advantage of trading using opposite IShares JP and IShares CMBS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares JP position performs unexpectedly, IShares CMBS 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 CMBS will offset losses from the drop in IShares CMBS's long position.| IShares JP vs. iShares JP Morgan | IShares JP vs. iShares JP Morgan | IShares JP vs. iShares Intl High | IShares JP vs. iShares International High |
| IShares CMBS vs. iShares Agency Bond | IShares CMBS vs. iShares GNMA Bond | IShares CMBS vs. iShares JP Morgan | IShares CMBS vs. iShares Aaa |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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