Correlation Between BetaShares Global and ISharesUBS Treasury
Can any of the company-specific risk be diversified away by investing in both BetaShares Global and ISharesUBS Treasury 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 BetaShares Global and ISharesUBS Treasury into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BetaShares Global Government and iSharesUBS Treasury, you can compare the effects of market volatilities on BetaShares Global and ISharesUBS Treasury 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 BetaShares Global with a short position of ISharesUBS Treasury. Check out your portfolio center. Please also check ongoing floating volatility patterns of BetaShares Global and ISharesUBS Treasury.
Diversification Opportunities for BetaShares Global and ISharesUBS Treasury
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between BetaShares and ISharesUBS is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding BetaShares Global Government and iSharesUBS Treasury in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iSharesUBS Treasury and BetaShares 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 BetaShares Global Government are associated (or correlated) with ISharesUBS Treasury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iSharesUBS Treasury has no effect on the direction of BetaShares Global i.e., BetaShares Global and ISharesUBS Treasury go up and down completely randomly.
Pair Corralation between BetaShares Global and ISharesUBS Treasury
Assuming the 90 days trading horizon BetaShares Global Government is expected to generate 3.39 times more return on investment than ISharesUBS Treasury. However, BetaShares Global is 3.39 times more volatile than iSharesUBS Treasury. It trades about 0.05 of its potential returns per unit of risk. iSharesUBS Treasury is currently generating about 0.1 per unit of risk. If you would invest 1,373 in BetaShares Global Government on August 30, 2024 and sell it today you would earn a total of 12.00 from holding BetaShares Global Government or generate 0.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
BetaShares Global Government vs. iSharesUBS Treasury
Performance |
| Timeline |
| BetaShares Global |
| iSharesUBS Treasury |
BetaShares Global and ISharesUBS Treasury Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BetaShares Global and ISharesUBS Treasury
The main advantage of trading using opposite BetaShares Global and ISharesUBS Treasury positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BetaShares Global position performs unexpectedly, ISharesUBS Treasury 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 ISharesUBS Treasury will offset losses from the drop in ISharesUBS Treasury's long position.The idea behind BetaShares Global Government and iSharesUBS Treasury 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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