Correlation Between IShares Intermediate and IShares 1
Can any of the company-specific risk be diversified away by investing in both IShares Intermediate and IShares 1 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 Intermediate and IShares 1 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Intermediate GovernmentCredit and iShares 1 3 Year, you can compare the effects of market volatilities on IShares Intermediate and IShares 1 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 Intermediate with a short position of IShares 1. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Intermediate and IShares 1.
Diversification Opportunities for IShares Intermediate and IShares 1
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and IShares is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding iShares Intermediate Governmen and iShares 1 3 Year in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares 1 3 and IShares Intermediate 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 Intermediate GovernmentCredit are associated (or correlated) with IShares 1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares 1 3 has no effect on the direction of IShares Intermediate i.e., IShares Intermediate and IShares 1 go up and down completely randomly.
Pair Corralation between IShares Intermediate and IShares 1
Considering the 90-day investment horizon iShares Intermediate GovernmentCredit is expected to generate 0.39 times more return on investment than IShares 1. However, iShares Intermediate GovernmentCredit is 2.57 times less risky than IShares 1. It trades about 0.04 of its potential returns per unit of risk. iShares 1 3 Year is currently generating about -0.1 per unit of risk. If you would invest 10,496 in iShares Intermediate GovernmentCredit on August 30, 2024 and sell it today you would earn a total of 21.00 from holding iShares Intermediate GovernmentCredit or generate 0.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Intermediate Governmen vs. iShares 1 3 Year
Performance |
| Timeline |
| iShares Intermediate |
| iShares 1 3 |
IShares Intermediate and IShares 1 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Intermediate and IShares 1
The main advantage of trading using opposite IShares Intermediate and IShares 1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Intermediate position performs unexpectedly, IShares 1 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 1 will offset losses from the drop in IShares 1's long position.| IShares Intermediate vs. iShares GovernmentCredit Bond | IShares Intermediate vs. iShares Agency Bond | IShares Intermediate vs. iShares New York | IShares Intermediate vs. iShares MBS ETF |
| IShares 1 vs. iShares International Treasury | IShares 1 vs. SPDR Bloomberg Short | IShares 1 vs. iShares Agency Bond | IShares 1 vs. iShares Intermediate GovernmentCredit |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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