Correlation Between IShares III and IShares Aggregate
Can any of the company-specific risk be diversified away by investing in both IShares III and IShares Aggregate 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 III and IShares Aggregate into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares III Public and iShares Aggregate Bond, you can compare the effects of market volatilities on IShares III and IShares Aggregate 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 III with a short position of IShares Aggregate. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares III and IShares Aggregate.
Diversification Opportunities for IShares III and IShares Aggregate
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IShares and IShares is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding iShares III Public and iShares Aggregate Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Aggregate Bond and IShares III 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 III Public are associated (or correlated) with IShares Aggregate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Aggregate Bond has no effect on the direction of IShares III i.e., IShares III and IShares Aggregate go up and down completely randomly.
Pair Corralation between IShares III and IShares Aggregate
Assuming the 90 days trading horizon IShares III is expected to generate 2.8 times less return on investment than IShares Aggregate. But when comparing it to its historical volatility, iShares III Public is 1.59 times less risky than IShares Aggregate. It trades about 0.15 of its potential returns per unit of risk. iShares Aggregate Bond is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 10,952 in iShares Aggregate Bond on August 30, 2024 and sell it today you would earn a total of 147.00 from holding iShares Aggregate Bond or generate 1.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares III Public vs. iShares Aggregate Bond
Performance |
| Timeline |
| iShares III Public |
| iShares Aggregate Bond |
IShares III and IShares Aggregate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares III and IShares Aggregate
The main advantage of trading using opposite IShares III and IShares Aggregate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares III position performs unexpectedly, IShares Aggregate 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 Aggregate will offset losses from the drop in IShares Aggregate's long position.| IShares III vs. iShares Aggregate Bond | IShares III vs. iShares Core Corp | IShares III vs. iShares Inflation Linked | IShares III vs. iShareso Government Bond |
| IShares Aggregate vs. iShares II Public | IShares Aggregate vs. iShares Core MSCI | IShares Aggregate vs. iShares SP 500 |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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