Correlation Between IShares Trust and IShares IBoxx
Can any of the company-specific risk be diversified away by investing in both IShares Trust and IShares IBoxx 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 IBoxx 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 iBoxx High, you can compare the effects of market volatilities on IShares Trust and IShares IBoxx 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 IBoxx. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Trust and IShares IBoxx.
Diversification Opportunities for IShares Trust and IShares IBoxx
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IShares and IShares is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding iShares Trust and iShares iBoxx High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares iBoxx High 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 IBoxx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares iBoxx High has no effect on the direction of IShares Trust i.e., IShares Trust and IShares IBoxx go up and down completely randomly.
Pair Corralation between IShares Trust and IShares IBoxx
Given the investment horizon of 90 days iShares Trust is expected to generate 4.49 times more return on investment than IShares IBoxx. However, IShares Trust is 4.49 times more volatile than iShares iBoxx High. It trades about 0.09 of its potential returns per unit of risk. iShares iBoxx High is currently generating about 0.05 per unit of risk. If you would invest 7,885 in iShares Trust on August 30, 2024 and sell it today you would earn a total of 277.00 from holding iShares Trust or generate 3.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Trust vs. iShares iBoxx High
Performance |
| Timeline |
| iShares Trust |
| iShares iBoxx High |
IShares Trust and IShares IBoxx Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Trust and IShares IBoxx
The main advantage of trading using opposite IShares Trust and IShares IBoxx positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Trust position performs unexpectedly, IShares IBoxx 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 IBoxx will offset losses from the drop in IShares IBoxx's long position.| IShares Trust vs. First Trust Exchange Traded | IShares Trust vs. Ultimus Managers Trust | IShares Trust vs. Horizon Kinetics Medical | IShares Trust vs. Harbor Health Care |
| 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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