Correlation Between IShares CMBS and IShares GovernmentCredit
Can any of the company-specific risk be diversified away by investing in both IShares CMBS and IShares GovernmentCredit 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 GovernmentCredit 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 GovernmentCredit Bond, you can compare the effects of market volatilities on IShares CMBS and IShares GovernmentCredit 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 GovernmentCredit. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares CMBS and IShares GovernmentCredit.
Diversification Opportunities for IShares CMBS and IShares GovernmentCredit
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between IShares and IShares is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding iShares CMBS ETF and iShares GovernmentCredit Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IShares GovernmentCredit 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 GovernmentCredit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IShares GovernmentCredit has no effect on the direction of IShares CMBS i.e., IShares CMBS and IShares GovernmentCredit go up and down completely randomly.
Pair Corralation between IShares CMBS and IShares GovernmentCredit
Given the investment horizon of 90 days IShares CMBS is expected to generate 1.83 times less return on investment than IShares GovernmentCredit. But when comparing it to its historical volatility, iShares CMBS ETF is 1.1 times less risky than IShares GovernmentCredit. It trades about 0.12 of its potential returns per unit of risk. iShares GovernmentCredit Bond is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 10,198 in iShares GovernmentCredit Bond on November 25, 2024 and sell it today you would earn a total of 127.00 from holding iShares GovernmentCredit Bond or generate 1.25% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
iShares CMBS ETF vs. iShares GovernmentCredit Bond
Performance |
Timeline |
iShares CMBS ETF |
IShares GovernmentCredit |
IShares CMBS and IShares GovernmentCredit Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with IShares CMBS and IShares GovernmentCredit
The main advantage of trading using opposite IShares CMBS and IShares GovernmentCredit positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares CMBS position performs unexpectedly, IShares GovernmentCredit 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 GovernmentCredit will offset losses from the drop in IShares GovernmentCredit's long position.IShares CMBS vs. iShares Agency Bond | ||
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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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