Correlation Between IShares CMBS and IShares MBS
Can any of the company-specific risk be diversified away by investing in both IShares CMBS and IShares MBS 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 MBS 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 MBS ETF, you can compare the effects of market volatilities on IShares CMBS and IShares MBS 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 MBS. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares CMBS and IShares MBS.
Diversification Opportunities for IShares CMBS and IShares MBS
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and IShares is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding iShares CMBS ETF and iShares MBS ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MBS ETF 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 MBS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares MBS ETF has no effect on the direction of IShares CMBS i.e., IShares CMBS and IShares MBS go up and down completely randomly.
Pair Corralation between IShares CMBS and IShares MBS
Given the investment horizon of 90 days IShares CMBS is expected to generate 9.92 times less return on investment than IShares MBS. But when comparing it to its historical volatility, iShares CMBS ETF is 1.68 times less risky than IShares MBS. It trades about 0.03 of its potential returns per unit of risk. iShares MBS ETF is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 9,253 in iShares MBS ETF on September 1, 2024 and sell it today you would earn a total of 140.00 from holding iShares MBS ETF or generate 1.51% 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 MBS ETF
Performance |
| Timeline |
| iShares CMBS ETF |
| iShares MBS ETF |
IShares CMBS and IShares MBS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares CMBS and IShares MBS
The main advantage of trading using opposite IShares CMBS and IShares MBS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares CMBS position performs unexpectedly, IShares MBS 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 MBS will offset losses from the drop in IShares MBS'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 |
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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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