Correlation Between IShares 1 and IShares Broad
Can any of the company-specific risk be diversified away by investing in both IShares 1 and IShares Broad 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 1 and IShares Broad into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares 1 5 Year and iShares Broad USD, you can compare the effects of market volatilities on IShares 1 and IShares Broad 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 1 with a short position of IShares Broad. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares 1 and IShares Broad.
Diversification Opportunities for IShares 1 and IShares Broad
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IShares and IShares is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding iShares 1 5 Year and iShares Broad USD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Broad USD and IShares 1 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 1 5 Year are associated (or correlated) with IShares Broad. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Broad USD has no effect on the direction of IShares 1 i.e., IShares 1 and IShares Broad go up and down completely randomly.
Pair Corralation between IShares 1 and IShares Broad
Given the investment horizon of 90 days IShares 1 is expected to generate 2.85 times less return on investment than IShares Broad. But when comparing it to its historical volatility, iShares 1 5 Year is 2.73 times less risky than IShares Broad. It trades about 0.07 of its potential returns per unit of risk. iShares Broad USD is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 5,102 in iShares Broad USD on August 28, 2024 and sell it today you would earn a total of 33.00 from holding iShares Broad USD or generate 0.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares 1 5 Year vs. iShares Broad USD
Performance |
| Timeline |
| iShares 1 5 |
| iShares Broad USD |
IShares 1 and IShares Broad Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares 1 and IShares Broad
The main advantage of trading using opposite IShares 1 and IShares Broad positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares 1 position performs unexpectedly, IShares Broad 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 Broad will offset losses from the drop in IShares Broad's long position.| IShares 1 vs. iShares 5 10 Year | IShares 1 vs. iShares 0 5 Year | IShares 1 vs. SPDR Barclays Short | IShares 1 vs. iShares Core Total |
| IShares Broad vs. iShares 5 10 Year | IShares Broad vs. iShares Broad USD | IShares Broad vs. iShares 1 5 Year | IShares Broad vs. iShares 0 5 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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