Correlation Between IShares IBoxx and IShares Preferred
Can any of the company-specific risk be diversified away by investing in both IShares IBoxx and IShares Preferred 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 Preferred 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 Preferred and, you can compare the effects of market volatilities on IShares IBoxx and IShares Preferred 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 Preferred. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares IBoxx and IShares Preferred.
Diversification Opportunities for IShares IBoxx and IShares Preferred
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IShares and IShares is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding iShares iBoxx High and iShares Preferred and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Preferred 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 Preferred. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Preferred has no effect on the direction of IShares IBoxx i.e., IShares IBoxx and IShares Preferred go up and down completely randomly.
Pair Corralation between IShares IBoxx and IShares Preferred
Considering the 90-day investment horizon iShares iBoxx High is expected to generate 0.51 times more return on investment than IShares Preferred. However, iShares iBoxx High is 1.97 times less risky than IShares Preferred. It trades about 0.17 of its potential returns per unit of risk. iShares Preferred and is currently generating about 0.08 per unit of risk. If you would invest 7,370 in iShares iBoxx High on September 1, 2024 and sell it today you would earn a total of 634.00 from holding iShares iBoxx High or generate 8.6% 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 Preferred and
Performance |
| Timeline |
| iShares iBoxx High |
| iShares Preferred |
IShares IBoxx and IShares Preferred Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares IBoxx and IShares Preferred
The main advantage of trading using opposite IShares IBoxx and IShares Preferred positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares IBoxx position performs unexpectedly, IShares Preferred 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 Preferred will offset losses from the drop in IShares Preferred'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 Preferred vs. Invesco Preferred ETF | IShares Preferred vs. iShares iBoxx High | IShares Preferred vs. Invesco Financial Preferred | IShares Preferred vs. SPDR Bloomberg High |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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