Correlation Between IShares BB and IShares BBB
Can any of the company-specific risk be diversified away by investing in both IShares BB and IShares BBB 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 BB and IShares BBB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares BB Rated and iShares BBB Rated, you can compare the effects of market volatilities on IShares BB and IShares BBB 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 BB with a short position of IShares BBB. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares BB and IShares BBB.
Diversification Opportunities for IShares BB and IShares BBB
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between IShares and IShares is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding iShares BB Rated and iShares BBB Rated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares BBB Rated and IShares BB 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 BB Rated are associated (or correlated) with IShares BBB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares BBB Rated has no effect on the direction of IShares BB i.e., IShares BB and IShares BBB go up and down completely randomly.
Pair Corralation between IShares BB and IShares BBB
Given the investment horizon of 90 days IShares BB is expected to generate 1.08 times less return on investment than IShares BBB. But when comparing it to its historical volatility, iShares BB Rated is 2.03 times less risky than IShares BBB. It trades about 0.19 of its potential returns per unit of risk. iShares BBB Rated is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 8,606 in iShares BBB Rated on August 30, 2024 and sell it today you would earn a total of 83.00 from holding iShares BBB Rated or generate 0.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares BB Rated vs. iShares BBB Rated
Performance |
| Timeline |
| iShares BB Rated |
| iShares BBB Rated |
IShares BB and IShares BBB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares BB and IShares BBB
The main advantage of trading using opposite IShares BB and IShares BBB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares BB position performs unexpectedly, IShares BBB 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 BBB will offset losses from the drop in IShares BBB's long position.The idea behind iShares BB Rated and iShares BBB Rated 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.| IShares BBB vs. iShares BB Rated | IShares BBB vs. iShares Aaa | IShares BBB vs. iShares Edge Investment | IShares BBB vs. BlackRock Intermediate Muni |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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