Correlation Between IShares IBoxx and IShares Agency
Can any of the company-specific risk be diversified away by investing in both IShares IBoxx and IShares Agency 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 IBoxx and IShares Agency into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares iBoxx Investment and iShares Agency Bond, you can compare the effects of market volatilities on IShares IBoxx and IShares Agency 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 IBoxx with a short position of IShares Agency. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares IBoxx and IShares Agency.
Diversification Opportunities for IShares IBoxx and IShares Agency
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and IShares is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding iShares iBoxx Investment and iShares Agency Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Agency Bond and IShares IBoxx 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 iBoxx Investment are associated (or correlated) with IShares Agency. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Agency Bond has no effect on the direction of IShares IBoxx i.e., IShares IBoxx and IShares Agency go up and down completely randomly.
Pair Corralation between IShares IBoxx and IShares Agency
Considering the 90-day investment horizon iShares iBoxx Investment is expected to generate 2.34 times more return on investment than IShares Agency. However, IShares IBoxx is 2.34 times more volatile than iShares Agency Bond. It trades about 0.06 of its potential returns per unit of risk. iShares Agency Bond is currently generating about 0.11 per unit of risk. If you would invest 10,312 in iShares iBoxx Investment on September 3, 2024 and sell it today you would earn a total of 743.00 from holding iShares iBoxx Investment or generate 7.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares iBoxx Investment vs. iShares Agency Bond
Performance |
| Timeline |
| iShares iBoxx Investment |
| iShares Agency Bond |
IShares IBoxx and IShares Agency Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares IBoxx and IShares Agency
The main advantage of trading using opposite IShares IBoxx and IShares Agency positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares IBoxx position performs unexpectedly, IShares Agency 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 Agency will offset losses from the drop in IShares Agency's long position.| IShares IBoxx vs. iShares iBoxx High | IShares IBoxx vs. iShares 1 3 Year | IShares IBoxx vs. iShares TIPS Bond | IShares IBoxx vs. iShares 7 10 Year |
| IShares Agency vs. iShares 7 10 Year | IShares Agency vs. iShares iBoxx Investment | IShares Agency vs. iShares TIPS Bond | IShares Agency 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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