Correlation Between IShares 1 and IShares Floating
Can any of the company-specific risk be diversified away by investing in both IShares 1 and IShares Floating 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 Floating into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares 1 5 Year and iShares Floating Rate, you can compare the effects of market volatilities on IShares 1 and IShares Floating 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 Floating. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares 1 and IShares Floating.
Diversification Opportunities for IShares 1 and IShares Floating
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IShares and IShares is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding iShares 1 5 Year and iShares Floating Rate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Floating Rate 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 5 Year are associated (or correlated) with IShares Floating. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Floating Rate has no effect on the direction of IShares 1 i.e., IShares 1 and IShares Floating go up and down completely randomly.
Pair Corralation between IShares 1 and IShares Floating
Assuming the 90 days trading horizon iShares 1 5 Year is expected to generate 3.56 times more return on investment than IShares Floating. However, IShares 1 is 3.56 times more volatile than iShares Floating Rate. It trades about 0.09 of its potential returns per unit of risk. iShares Floating Rate is currently generating about 0.31 per unit of risk. If you would invest 1,592 in iShares 1 5 Year on November 27, 2024 and sell it today you would earn a total of 161.00 from holding iShares 1 5 Year or generate 10.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares 1 5 Year vs. iShares Floating Rate
Performance |
| Timeline |
| iShares 1 5 |
| iShares Floating Rate |
IShares 1 and IShares Floating Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares 1 and IShares Floating
The main advantage of trading using opposite IShares 1 and IShares Floating positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares 1 position performs unexpectedly, IShares Floating 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 Floating will offset losses from the drop in IShares Floating's long position.| IShares 1 vs. iShares 1 5 Year | IShares 1 vs. iShares Premium Money | IShares 1 vs. iShares Canadian Government | IShares 1 vs. iShares Global Monthly |
| IShares Floating vs. iShares 1 10Yr Laddered | IShares Floating vs. iShares JP Morgan | IShares Floating vs. iShares Convertible Bond | IShares Floating vs. iShares IG 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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