Correlation Between IShares International and IShares 5
Can any of the company-specific risk be diversified away by investing in both IShares International and IShares 5 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 International and IShares 5 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares International Treasury and iShares 5 10 Year, you can compare the effects of market volatilities on IShares International and IShares 5 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 International with a short position of IShares 5. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares International and IShares 5.
Diversification Opportunities for IShares International and IShares 5
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and IShares is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding iShares International Treasury and iShares 5 10 Year in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares 5 10 and IShares International 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 International Treasury are associated (or correlated) with IShares 5. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares 5 10 has no effect on the direction of IShares International i.e., IShares International and IShares 5 go up and down completely randomly.
Pair Corralation between IShares International and IShares 5
Given the investment horizon of 90 days iShares International Treasury is expected to under-perform the IShares 5. In addition to that, IShares International is 1.43 times more volatile than iShares 5 10 Year. It trades about 0.0 of its total potential returns per unit of risk. iShares 5 10 Year is currently generating about 0.05 per unit of volatility. If you would invest 4,657 in iShares 5 10 Year on August 27, 2024 and sell it today you would earn a total of 545.00 from holding iShares 5 10 Year or generate 11.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares International Treasury vs. iShares 5 10 Year
Performance |
| Timeline |
| iShares International |
| iShares 5 10 |
IShares International and IShares 5 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares International and IShares 5
The main advantage of trading using opposite IShares International and IShares 5 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares International position performs unexpectedly, IShares 5 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 5 will offset losses from the drop in IShares 5's long position.The idea behind iShares International Treasury and iShares 5 10 Year pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
| IShares 5 vs. iShares 1 5 Year | IShares 5 vs. iShares Broad USD | IShares 5 vs. iShares 10 Year | IShares 5 vs. SPDR Barclays Intermediate |
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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