Correlation Between IShares Inflation and IShares Interest
Can any of the company-specific risk be diversified away by investing in both IShares Inflation and IShares Interest 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 Inflation and IShares Interest into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Inflation Hedged and iShares Interest Rate, you can compare the effects of market volatilities on IShares Inflation and IShares Interest 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 Inflation with a short position of IShares Interest. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Inflation and IShares Interest.
Diversification Opportunities for IShares Inflation and IShares Interest
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between IShares and IShares is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding iShares Inflation Hedged and iShares Interest Rate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Interest Rate and IShares Inflation 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 Inflation Hedged are associated (or correlated) with IShares Interest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Interest Rate has no effect on the direction of IShares Inflation i.e., IShares Inflation and IShares Interest go up and down completely randomly.
Pair Corralation between IShares Inflation and IShares Interest
Given the investment horizon of 90 days iShares Inflation Hedged is expected to generate 1.28 times more return on investment than IShares Interest. However, IShares Inflation is 1.28 times more volatile than iShares Interest Rate. It trades about 0.08 of its potential returns per unit of risk. iShares Interest Rate is currently generating about 0.08 per unit of risk. If you would invest 2,532 in iShares Inflation Hedged on August 29, 2024 and sell it today you would earn a total of 89.00 from holding iShares Inflation Hedged or generate 3.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Inflation Hedged vs. iShares Interest Rate
Performance |
| Timeline |
| iShares Inflation Hedged |
| iShares Interest Rate |
IShares Inflation and IShares Interest Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Inflation and IShares Interest
The main advantage of trading using opposite IShares Inflation and IShares Interest positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Inflation position performs unexpectedly, IShares Interest 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 Interest will offset losses from the drop in IShares Interest's long position.| IShares Inflation vs. iShares Interest Rate | IShares Inflation vs. iShares Interest Rate | IShares Inflation vs. iShares Edge Investment | IShares Inflation vs. iShares Interest Rate |
| IShares Interest vs. iShares Interest Rate | IShares Interest vs. iShares Interest Rate | IShares Interest vs. iShares Edge Investment | IShares Interest vs. iShares Inflation Hedged |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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