Correlation Between IShares Global and IShares Floating
Can any of the company-specific risk be diversified away by investing in both IShares Global 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 Global 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 Global Monthly and iShares Floating Rate, you can compare the effects of market volatilities on IShares Global 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 Global with a short position of IShares Floating. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Global and IShares Floating.
Diversification Opportunities for IShares Global and IShares Floating
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IShares and IShares is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding iShares Global Monthly 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 Global 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 Global Monthly 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 Global i.e., IShares Global and IShares Floating go up and down completely randomly.
Pair Corralation between IShares Global and IShares Floating
Assuming the 90 days trading horizon iShares Global Monthly is expected to generate 18.13 times more return on investment than IShares Floating. However, IShares Global is 18.13 times more volatile than iShares Floating Rate. It trades about 0.11 of its potential returns per unit of risk. iShares Floating Rate is currently generating about 0.4 per unit of risk. If you would invest 2,198 in iShares Global Monthly on August 29, 2024 and sell it today you would earn a total of 62.00 from holding iShares Global Monthly or generate 2.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Global Monthly vs. iShares Floating Rate
Performance |
| Timeline |
| iShares Global Monthly |
| iShares Floating Rate |
IShares Global and IShares Floating Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Global and IShares Floating
The main advantage of trading using opposite IShares Global and IShares Floating positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Global 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 Global vs. iShares Global Infrastructure | IShares Global vs. iShares Global Real | IShares Global vs. iShares Dividend Growers | IShares Global vs. iShares 1 5 Year |
| IShares Floating vs. iShares Canadian Short | IShares Floating vs. iShares Core Canadian | IShares Floating vs. BMO Short Corporate | IShares Floating vs. Vanguard Canadian Short |
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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