Correlation Between IShares GNMA and IShares International
Can any of the company-specific risk be diversified away by investing in both IShares GNMA and IShares International 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 GNMA and IShares International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares GNMA Bond and iShares International Treasury, you can compare the effects of market volatilities on IShares GNMA and IShares International 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 GNMA with a short position of IShares International. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares GNMA and IShares International.
Diversification Opportunities for IShares GNMA and IShares International
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and IShares is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding iShares GNMA Bond and iShares International Treasury in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares International and IShares GNMA 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 GNMA Bond are associated (or correlated) with IShares International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares International has no effect on the direction of IShares GNMA i.e., IShares GNMA and IShares International go up and down completely randomly.
Pair Corralation between IShares GNMA and IShares International
Given the investment horizon of 90 days iShares GNMA Bond is expected to generate 0.66 times more return on investment than IShares International. However, iShares GNMA Bond is 1.52 times less risky than IShares International. It trades about -0.12 of its potential returns per unit of risk. iShares International Treasury is currently generating about -0.25 per unit of risk. If you would invest 4,468 in iShares GNMA Bond on August 28, 2024 and sell it today you would lose (89.00) from holding iShares GNMA Bond or give up 1.99% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares GNMA Bond vs. iShares International Treasury
Performance |
| Timeline |
| iShares GNMA Bond |
| iShares International |
IShares GNMA and IShares International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares GNMA and IShares International
The main advantage of trading using opposite IShares GNMA and IShares International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares GNMA position performs unexpectedly, IShares International 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 International will offset losses from the drop in IShares International's long position.| IShares GNMA vs. Vanguard Long Term Treasury | IShares GNMA vs. Vanguard Short Term Treasury | IShares GNMA vs. Vanguard Intermediate Term Corporate | IShares GNMA vs. Vanguard Mortgage Backed Securities |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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