Correlation Between IShares GovernmentCredit and IShares Global
Can any of the company-specific risk be diversified away by investing in both IShares GovernmentCredit and IShares Global 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 GovernmentCredit and IShares Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares GovernmentCredit Bond and iShares Global Utilities, you can compare the effects of market volatilities on IShares GovernmentCredit and IShares Global 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 GovernmentCredit with a short position of IShares Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares GovernmentCredit and IShares Global.
Diversification Opportunities for IShares GovernmentCredit and IShares Global
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between IShares and IShares is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding iShares GovernmentCredit Bond and iShares Global Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Global Utilities and IShares GovernmentCredit 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 GovernmentCredit Bond are associated (or correlated) with IShares Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Global Utilities has no effect on the direction of IShares GovernmentCredit i.e., IShares GovernmentCredit and IShares Global go up and down completely randomly.
Pair Corralation between IShares GovernmentCredit and IShares Global
Considering the 90-day investment horizon iShares GovernmentCredit Bond is expected to under-perform the IShares Global. But the etf apears to be less risky and, when comparing its historical volatility, iShares GovernmentCredit Bond is 2.64 times less risky than IShares Global. The etf trades about -0.02 of its potential returns per unit of risk. The iShares Global Utilities is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 6,693 in iShares Global Utilities on September 2, 2024 and sell it today you would earn a total of 337.00 from holding iShares Global Utilities or generate 5.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares GovernmentCredit Bond vs. iShares Global Utilities
Performance |
| Timeline |
| IShares GovernmentCredit |
| iShares Global Utilities |
IShares GovernmentCredit and IShares Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares GovernmentCredit and IShares Global
The main advantage of trading using opposite IShares GovernmentCredit and IShares Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares GovernmentCredit position performs unexpectedly, IShares Global 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 Global will offset losses from the drop in IShares Global's long position.The idea behind iShares GovernmentCredit Bond and iShares Global Utilities pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
| IShares Global vs. iShares Global Consumer | IShares Global vs. iShares Global Industrials | IShares Global vs. iShares Global Consumer | IShares Global vs. iShares Global Materials |
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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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