Correlation Between FT Cboe and IShares IBonds

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Can any of the company-specific risk be diversified away by investing in both FT Cboe and IShares IBonds 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 FT Cboe and IShares IBonds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FT Cboe Vest and iShares iBonds Dec, you can compare the effects of market volatilities on FT Cboe and IShares IBonds 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 FT Cboe with a short position of IShares IBonds. Check out your portfolio center. Please also check ongoing floating volatility patterns of FT Cboe and IShares IBonds.

Diversification Opportunities for FT Cboe and IShares IBonds

KNGISharesDiversified AwayKNGISharesDiversified Away100%
0.44
  Correlation Coefficient

Very weak diversification

The 3 months correlation between KNG and IShares is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding FT Cboe Vest and iShares iBonds Dec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares iBonds Dec and FT Cboe 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 FT Cboe Vest are associated (or correlated) with IShares IBonds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares iBonds Dec has no effect on the direction of FT Cboe i.e., FT Cboe and IShares IBonds go up and down completely randomly.

Pair Corralation between FT Cboe and IShares IBonds

Considering the 90-day investment horizon FT Cboe Vest is expected to under-perform the IShares IBonds. In addition to that, FT Cboe is 3.08 times more volatile than iShares iBonds Dec. It trades about -0.05 of its total potential returns per unit of risk. iShares iBonds Dec is currently generating about 0.14 per unit of volatility. If you would invest  2,129  in iShares iBonds Dec on November 21, 2024 and sell it today you would earn a total of  12.00  from holding iShares iBonds Dec or generate 0.56% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

FT Cboe Vest  vs.  iShares iBonds Dec

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -6-4-20
JavaScript chart by amCharts 3.21.15KNG IBTJ
       Timeline  
FT Cboe Vest 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days FT Cboe Vest has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, FT Cboe is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb4950515253
iShares iBonds Dec 

Risk-Adjusted Performance

Modest

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in iShares iBonds Dec are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively steady basic indicators, IShares IBonds is not utilizing all of its potentials. The current stock price chaos, may contribute to medium-term losses for the stakeholders.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb21.121.1521.221.2521.321.3521.421.4521.5

FT Cboe and IShares IBonds Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-1.1-0.81-0.52-0.23-0.03260.08520.350.640.931.22 2468
JavaScript chart by amCharts 3.21.15KNG IBTJ
       Returns  

Pair Trading with FT Cboe and IShares IBonds

The main advantage of trading using opposite FT Cboe and IShares IBonds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FT Cboe position performs unexpectedly, IShares IBonds 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 IBonds will offset losses from the drop in IShares IBonds' long position.
The idea behind FT Cboe Vest and iShares iBonds Dec 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.
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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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.

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