Correlation Between IShares II and VanEck IBoxx
Can any of the company-specific risk be diversified away by investing in both IShares II and VanEck IBoxx 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 II and VanEck IBoxx into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares II Public and VanEck iBoxx EUR, you can compare the effects of market volatilities on IShares II and VanEck IBoxx 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 II with a short position of VanEck IBoxx. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares II and VanEck IBoxx.
Diversification Opportunities for IShares II and VanEck IBoxx
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between IShares and VanEck is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding iShares II Public and VanEck iBoxx EUR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck iBoxx EUR and IShares II 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 II Public are associated (or correlated) with VanEck IBoxx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck iBoxx EUR has no effect on the direction of IShares II i.e., IShares II and VanEck IBoxx go up and down completely randomly.
Pair Corralation between IShares II and VanEck IBoxx
Assuming the 90 days trading horizon iShares II Public is expected to under-perform the VanEck IBoxx. In addition to that, IShares II is 3.63 times more volatile than VanEck iBoxx EUR. It trades about -0.01 of its total potential returns per unit of risk. VanEck iBoxx EUR is currently generating about 0.2 per unit of volatility. If you would invest 1,884 in VanEck iBoxx EUR on September 4, 2024 and sell it today you would earn a total of 22.00 from holding VanEck iBoxx EUR or generate 1.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares II Public vs. VanEck iBoxx EUR
Performance |
| Timeline |
| iShares II Public |
| VanEck iBoxx EUR |
IShares II and VanEck IBoxx Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares II and VanEck IBoxx
The main advantage of trading using opposite IShares II and VanEck IBoxx positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares II position performs unexpectedly, VanEck IBoxx 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 VanEck IBoxx will offset losses from the drop in VanEck IBoxx's long position.| IShares II vs. Vanguard FTSE Developed | IShares II vs. HSBC MSCI Japan | IShares II vs. Hydratec Industries NV | IShares II vs. VanEck Polkadot ETN |
| VanEck IBoxx vs. Vanguard FTSE Developed | VanEck IBoxx vs. HSBC MSCI Japan | VanEck IBoxx vs. iShares II Public | VanEck IBoxx vs. Hydratec Industries NV |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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