Correlation Between IShares IBoxx and WisdomTree Short
Can any of the company-specific risk be diversified away by investing in both IShares IBoxx and WisdomTree Short 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 WisdomTree Short 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 WisdomTree Short Term Corporate, you can compare the effects of market volatilities on IShares IBoxx and WisdomTree Short 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 WisdomTree Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares IBoxx and WisdomTree Short.
Diversification Opportunities for IShares IBoxx and WisdomTree Short
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IShares and WisdomTree is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding iShares iBoxx High and WisdomTree Short Term Corporat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Short Term 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 WisdomTree Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Short Term has no effect on the direction of IShares IBoxx i.e., IShares IBoxx and WisdomTree Short go up and down completely randomly.
Pair Corralation between IShares IBoxx and WisdomTree Short
Considering the 90-day investment horizon IShares IBoxx is expected to generate 1.01 times less return on investment than WisdomTree Short. But when comparing it to its historical volatility, iShares iBoxx High is 1.21 times less risky than WisdomTree Short. It trades about 0.37 of its potential returns per unit of risk. WisdomTree Short Term Corporate is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest 4,518 in WisdomTree Short Term Corporate on September 1, 2024 and sell it today you would earn a total of 75.00 from holding WisdomTree Short Term Corporate or generate 1.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares iBoxx High vs. WisdomTree Short Term Corporat
Performance |
| Timeline |
| iShares iBoxx High |
| WisdomTree Short Term |
IShares IBoxx and WisdomTree Short Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares IBoxx and WisdomTree Short
The main advantage of trading using opposite IShares IBoxx and WisdomTree Short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares IBoxx position performs unexpectedly, WisdomTree Short 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 WisdomTree Short will offset losses from the drop in WisdomTree Short'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 |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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