Correlation Between IShares Global and IShares GovernmentCredit
Can any of the company-specific risk be diversified away by investing in both IShares Global and IShares GovernmentCredit 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 Global and IShares GovernmentCredit into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Global Utilities and iShares GovernmentCredit Bond, you can compare the effects of market volatilities on IShares Global and IShares GovernmentCredit 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 Global with a short position of IShares GovernmentCredit. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Global and IShares GovernmentCredit.
Diversification Opportunities for IShares Global and IShares GovernmentCredit
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between IShares and IShares is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding iShares Global Utilities and iShares GovernmentCredit Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IShares GovernmentCredit and IShares Global 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 Global Utilities are associated (or correlated) with IShares GovernmentCredit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IShares GovernmentCredit has no effect on the direction of IShares Global i.e., IShares Global and IShares GovernmentCredit go up and down completely randomly.
Pair Corralation between IShares Global and IShares GovernmentCredit
Considering the 90-day investment horizon iShares Global Utilities is expected to generate 2.64 times more return on investment than IShares GovernmentCredit. However, IShares Global is 2.64 times more volatile than iShares GovernmentCredit Bond. It trades about 0.1 of its potential returns per unit of risk. iShares GovernmentCredit Bond is currently generating about -0.02 per unit of risk. If you would invest 6,693 in iShares Global Utilities on September 2, 2024 and sell it today you would earn a total of 337.00 from holding iShares Global Utilities or generate 5.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Global Utilities vs. iShares GovernmentCredit Bond
Performance |
| Timeline |
| iShares Global Utilities |
| IShares GovernmentCredit |
IShares Global and IShares GovernmentCredit Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Global and IShares GovernmentCredit
The main advantage of trading using opposite IShares Global and IShares GovernmentCredit positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Global position performs unexpectedly, IShares GovernmentCredit 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 GovernmentCredit will offset losses from the drop in IShares GovernmentCredit's long position.| IShares Global vs. iShares Global Consumer | IShares Global vs. iShares Global Industrials | IShares Global vs. iShares Global Consumer | IShares Global vs. iShares Global Materials |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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