Correlation Between IShares IBoxx and IShares Edge
Can any of the company-specific risk be diversified away by investing in both IShares IBoxx and IShares Edge 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 Edge 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 Edge High, you can compare the effects of market volatilities on IShares IBoxx and IShares Edge 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 Edge. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares IBoxx and IShares Edge.
Diversification Opportunities for IShares IBoxx and IShares Edge
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between IShares and IShares is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding iShares iBoxx Investment and iShares Edge High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Edge High 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 Edge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Edge High has no effect on the direction of IShares IBoxx i.e., IShares IBoxx and IShares Edge go up and down completely randomly.
Pair Corralation between IShares IBoxx and IShares Edge
Considering the 90-day investment horizon IShares IBoxx is expected to generate 2.24 times less return on investment than IShares Edge. In addition to that, IShares IBoxx is 1.42 times more volatile than iShares Edge High. It trades about 0.03 of its total potential returns per unit of risk. iShares Edge High is currently generating about 0.11 per unit of volatility. If you would invest 3,969 in iShares Edge High on September 4, 2024 and sell it today you would earn a total of 802.00 from holding iShares Edge High or generate 20.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares iBoxx Investment vs. iShares Edge High
Performance |
| Timeline |
| iShares iBoxx Investment |
| iShares Edge High |
IShares IBoxx and IShares Edge Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares IBoxx and IShares Edge
The main advantage of trading using opposite IShares IBoxx and IShares Edge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares IBoxx position performs unexpectedly, IShares Edge 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 Edge will offset losses from the drop in IShares Edge'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 Edge vs. iShares iBoxx Investment | IShares Edge vs. SPDR Bloomberg High | IShares Edge vs. iShares TIPS Bond | IShares Edge vs. iShares 20 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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