Correlation Between IShares Trust and IShares TIPS
Can any of the company-specific risk be diversified away by investing in both IShares Trust and IShares TIPS 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 Trust and IShares TIPS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Trust and iShares TIPS Bond, you can compare the effects of market volatilities on IShares Trust and IShares TIPS 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 Trust with a short position of IShares TIPS. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Trust and IShares TIPS.
Diversification Opportunities for IShares Trust and IShares TIPS
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and IShares is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding iShares Trust and iShares TIPS Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares TIPS Bond and IShares Trust 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 Trust are associated (or correlated) with IShares TIPS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares TIPS Bond has no effect on the direction of IShares Trust i.e., IShares Trust and IShares TIPS go up and down completely randomly.
Pair Corralation between IShares Trust and IShares TIPS
Given the investment horizon of 90 days IShares Trust is expected to generate 1.08 times less return on investment than IShares TIPS. But when comparing it to its historical volatility, iShares Trust is 1.62 times less risky than IShares TIPS. It trades about 0.13 of its potential returns per unit of risk. iShares TIPS Bond is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 10,822 in iShares TIPS Bond on September 1, 2024 and sell it today you would earn a total of 54.00 from holding iShares TIPS Bond or generate 0.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Trust vs. iShares TIPS Bond
Performance |
| Timeline |
| iShares Trust |
| iShares TIPS Bond |
IShares Trust and IShares TIPS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Trust and IShares TIPS
The main advantage of trading using opposite IShares Trust and IShares TIPS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Trust position performs unexpectedly, IShares TIPS 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 TIPS will offset losses from the drop in IShares TIPS's long position.| IShares Trust vs. Invesco BulletShares 2025 | IShares Trust vs. iShares iBonds Dec | IShares Trust vs. Invesco BulletShares 2026 | IShares Trust vs. iShares iBonds Dec |
| IShares TIPS vs. iShares iBoxx Investment | IShares TIPS vs. iShares 1 3 Year | IShares TIPS vs. iShares 7 10 Year | IShares TIPS vs. iShares Core Aggregate |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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