Correlation Between IShares GovernmentCredit and IShares MSCI
Can any of the company-specific risk be diversified away by investing in both IShares GovernmentCredit and IShares MSCI 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 MSCI 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 MSCI Japan, you can compare the effects of market volatilities on IShares GovernmentCredit and IShares MSCI 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 MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares GovernmentCredit and IShares MSCI.
Diversification Opportunities for IShares GovernmentCredit and IShares MSCI
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IShares and IShares is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding iShares GovernmentCredit Bond and iShares MSCI Japan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI Japan 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 MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares MSCI Japan has no effect on the direction of IShares GovernmentCredit i.e., IShares GovernmentCredit and IShares MSCI go up and down completely randomly.
Pair Corralation between IShares GovernmentCredit and IShares MSCI
Considering the 90-day investment horizon iShares GovernmentCredit Bond is expected to generate 0.33 times more return on investment than IShares MSCI. However, iShares GovernmentCredit Bond is 3.05 times less risky than IShares MSCI. It trades about -0.02 of its potential returns per unit of risk. iShares MSCI Japan is currently generating about -0.02 per unit of risk. If you would invest 10,519 in iShares GovernmentCredit Bond on September 2, 2024 and sell it today you would lose (55.00) from holding iShares GovernmentCredit Bond or give up 0.52% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares GovernmentCredit Bond vs. iShares MSCI Japan
Performance |
| Timeline |
| IShares GovernmentCredit |
| iShares MSCI Japan |
IShares GovernmentCredit and IShares MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares GovernmentCredit and IShares MSCI
The main advantage of trading using opposite IShares GovernmentCredit and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares GovernmentCredit position performs unexpectedly, IShares MSCI 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 MSCI will offset losses from the drop in IShares MSCI's long position.The idea behind iShares GovernmentCredit Bond and iShares MSCI Japan 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.
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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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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