Correlation Between IShares IBoxx and IShares Fixed
Can any of the company-specific risk be diversified away by investing in both IShares IBoxx and IShares Fixed 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 IBoxx and IShares Fixed into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares iBoxx High and iShares Fixed Income, you can compare the effects of market volatilities on IShares IBoxx and IShares Fixed 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 IBoxx with a short position of IShares Fixed. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares IBoxx and IShares Fixed.
Diversification Opportunities for IShares IBoxx and IShares Fixed
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IShares and IShares is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding iShares iBoxx High and iShares Fixed Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Fixed Income and IShares IBoxx 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 iBoxx High are associated (or correlated) with IShares Fixed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Fixed Income has no effect on the direction of IShares IBoxx i.e., IShares IBoxx and IShares Fixed go up and down completely randomly.
Pair Corralation between IShares IBoxx and IShares Fixed
Considering the 90-day investment horizon iShares iBoxx High is expected to generate 1.14 times more return on investment than IShares Fixed. However, IShares IBoxx is 1.14 times more volatile than iShares Fixed Income. It trades about 0.09 of its potential returns per unit of risk. iShares Fixed Income is currently generating about 0.07 per unit of risk. If you would invest 6,747 in iShares iBoxx High on September 3, 2024 and sell it today you would earn a total of 1,257 from holding iShares iBoxx High or generate 18.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares iBoxx High vs. iShares Fixed Income
Performance |
| Timeline |
| iShares iBoxx High |
| iShares Fixed Income |
IShares IBoxx and IShares Fixed Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares IBoxx and IShares Fixed
The main advantage of trading using opposite IShares IBoxx and IShares Fixed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares IBoxx position performs unexpectedly, IShares Fixed 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 Fixed will offset losses from the drop in IShares Fixed's long position.| IShares IBoxx vs. iShares iBoxx Investment | IShares IBoxx vs. SPDR Bloomberg High | IShares IBoxx vs. iShares TIPS Bond | IShares IBoxx vs. iShares 20 Year |
| IShares Fixed vs. iShares iBoxx High | IShares Fixed vs. iShares 1 3 Year | IShares Fixed vs. iShares TIPS Bond | IShares Fixed vs. iShares 7 10 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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