Correlation Between IShares 3 and IShares 25
Can any of the company-specific risk be diversified away by investing in both IShares 3 and IShares 25 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 25 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 25 Year, you can compare the effects of market volatilities on IShares 3 and IShares 25 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 25. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares 3 and IShares 25.
Diversification Opportunities for IShares 3 and IShares 25
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and IShares is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding iShares 3 7 Year and iShares 25 Year in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares 25 Year 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 25. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares 25 Year has no effect on the direction of IShares 3 i.e., IShares 3 and IShares 25 go up and down completely randomly.
Pair Corralation between IShares 3 and IShares 25
Considering the 90-day investment horizon IShares 3 is expected to generate 10.16 times less return on investment than IShares 25. But when comparing it to its historical volatility, iShares 3 7 Year is 6.94 times less risky than IShares 25. It trades about 0.05 of its potential returns per unit of risk. iShares 25 Year is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1,087 in iShares 25 Year on September 4, 2024 and sell it today you would earn a total of 28.00 from holding iShares 25 Year or generate 2.58% 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 25 Year
Performance |
| Timeline |
| iShares 3 7 |
| iShares 25 Year |
IShares 3 and IShares 25 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares 3 and IShares 25
The main advantage of trading using opposite IShares 3 and IShares 25 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares 3 position performs unexpectedly, IShares 25 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 25 will offset losses from the drop in IShares 25'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 25 vs. iShares 1 3 Year | IShares 25 vs. iShares 20 Year | IShares 25 vs. iShares iBoxx Investment | IShares 25 vs. iShares 3 7 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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