Correlation Between IShares 3 and IShares GNMA
Can any of the company-specific risk be diversified away by investing in both IShares 3 and IShares GNMA 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 3 and IShares GNMA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares 3 7 Year and iShares GNMA Bond, you can compare the effects of market volatilities on IShares 3 and IShares GNMA 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 3 with a short position of IShares GNMA. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares 3 and IShares GNMA.
Diversification Opportunities for IShares 3 and IShares GNMA
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 3 7 Year and iShares GNMA Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares GNMA Bond and IShares 3 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 3 7 Year are associated (or correlated) with IShares GNMA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares GNMA Bond has no effect on the direction of IShares 3 i.e., IShares 3 and IShares GNMA go up and down completely randomly.
Pair Corralation between IShares 3 and IShares GNMA
Considering the 90-day investment horizon iShares 3 7 Year is expected to under-perform the IShares GNMA. But the etf apears to be less risky and, when comparing its historical volatility, iShares 3 7 Year is 1.68 times less risky than IShares GNMA. The etf trades about -0.01 of its potential returns per unit of risk. The iShares GNMA Bond is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 4,346 in iShares GNMA Bond on August 29, 2024 and sell it today you would earn a total of 23.00 from holding iShares GNMA Bond or generate 0.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares 3 7 Year vs. iShares GNMA Bond
Performance |
| Timeline |
| iShares 3 7 |
| iShares GNMA Bond |
IShares 3 and IShares GNMA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares 3 and IShares GNMA
The main advantage of trading using opposite IShares 3 and IShares GNMA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares 3 position performs unexpectedly, IShares GNMA 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 GNMA will offset losses from the drop in IShares GNMA's long position.| IShares 3 vs. iShares 10 20 Year | IShares 3 vs. iShares 7 10 Year | IShares 3 vs. iShares 1 3 Year | IShares 3 vs. iShares MBS ETF |
| IShares GNMA vs. Vanguard Long Term Treasury | IShares GNMA vs. Vanguard Short Term Treasury | IShares GNMA vs. Vanguard Intermediate Term Corporate | IShares GNMA vs. Vanguard Mortgage Backed Securities |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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