Correlation Between IShares CMBS and IShares Agency
Can any of the company-specific risk be diversified away by investing in both IShares CMBS and IShares Agency 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 CMBS and IShares Agency into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares CMBS ETF and iShares Agency Bond, you can compare the effects of market volatilities on IShares CMBS and IShares Agency 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 CMBS with a short position of IShares Agency. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares CMBS and IShares Agency.
Diversification Opportunities for IShares CMBS and IShares Agency
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and IShares is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding iShares CMBS ETF and iShares Agency Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Agency Bond and IShares CMBS 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 CMBS ETF are associated (or correlated) with IShares Agency. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Agency Bond has no effect on the direction of IShares CMBS i.e., IShares CMBS and IShares Agency go up and down completely randomly.
Pair Corralation between IShares CMBS and IShares Agency
Given the investment horizon of 90 days iShares CMBS ETF is expected to under-perform the IShares Agency. In addition to that, IShares CMBS is 1.59 times more volatile than iShares Agency Bond. It trades about -0.08 of its total potential returns per unit of risk. iShares Agency Bond is currently generating about 0.04 per unit of volatility. If you would invest 10,865 in iShares Agency Bond on August 27, 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 | 100.0% |
| Values | Daily Returns |
iShares CMBS ETF vs. iShares Agency Bond
Performance |
| Timeline |
| iShares CMBS ETF |
| iShares Agency Bond |
IShares CMBS and IShares Agency Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares CMBS and IShares Agency
The main advantage of trading using opposite IShares CMBS and IShares Agency positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares CMBS position performs unexpectedly, IShares Agency 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 Agency will offset losses from the drop in IShares Agency's long position.| 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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