Correlation Between IShares 25 and IShares 7
Can any of the company-specific risk be diversified away by investing in both IShares 25 and IShares 7 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 25 and IShares 7 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares 25 Year and iShares 7 10 Year, you can compare the effects of market volatilities on IShares 25 and IShares 7 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 25 with a short position of IShares 7. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares 25 and IShares 7.
Diversification Opportunities for IShares 25 and IShares 7
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and IShares is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding iShares 25 Year and iShares 7 10 Year in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares 7 10 and IShares 25 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 25 Year are associated (or correlated) with IShares 7. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares 7 10 has no effect on the direction of IShares 25 i.e., IShares 25 and IShares 7 go up and down completely randomly.
Pair Corralation between IShares 25 and IShares 7
Given the investment horizon of 90 days iShares 25 Year is expected to under-perform the IShares 7. In addition to that, IShares 25 is 4.3 times more volatile than iShares 7 10 Year. It trades about -0.06 of its total potential returns per unit of risk. iShares 7 10 Year is currently generating about -0.13 per unit of volatility. If you would invest 9,460 in iShares 7 10 Year on August 24, 2024 and sell it today you would lose (106.00) from holding iShares 7 10 Year or give up 1.12% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares 25 Year vs. iShares 7 10 Year
Performance |
| Timeline |
| iShares 25 Year |
| iShares 7 10 |
IShares 25 and IShares 7 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares 25 and IShares 7
The main advantage of trading using opposite IShares 25 and IShares 7 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares 25 position performs unexpectedly, IShares 7 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 7 will offset losses from the drop in IShares 7's long position.| IShares 25 vs. iShares Treasury Floating | IShares 25 vs. Schwab Long Term Treasury | IShares 25 vs. iShares iBonds Dec | IShares 25 vs. iShares iBonds Dec |
| IShares 7 vs. iShares 1 3 Year | IShares 7 vs. iShares 20 Year | IShares 7 vs. iShares iBoxx Investment | IShares 7 vs. iShares 3 7 Year |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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