Correlation Between IShares Short and VCRM
Can any of the company-specific risk be diversified away by investing in both IShares Short and VCRM 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 Short and VCRM into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Short Maturity and VCRM, you can compare the effects of market volatilities on IShares Short and VCRM 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 Short with a short position of VCRM. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Short and VCRM.
Diversification Opportunities for IShares Short and VCRM
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between IShares and VCRM is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding iShares Short Maturity and VCRM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VCRM and IShares Short 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 Short Maturity are associated (or correlated) with VCRM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VCRM has no effect on the direction of IShares Short i.e., IShares Short and VCRM go up and down completely randomly.
Pair Corralation between IShares Short and VCRM
Given the investment horizon of 90 days IShares Short is expected to generate 1.74 times less return on investment than VCRM. But when comparing it to its historical volatility, iShares Short Maturity is 3.41 times less risky than VCRM. It trades about 0.25 of its potential returns per unit of risk. VCRM is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 7,532 in VCRM on September 14, 2024 and sell it today you would earn a total of 28.00 from holding VCRM or generate 0.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 6.05% |
| Values | Daily Returns |
iShares Short Maturity vs. VCRM
Performance |
| Timeline |
| iShares Short Maturity |
| VCRM |
IShares Short and VCRM Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Short and VCRM
The main advantage of trading using opposite IShares Short and VCRM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Short position performs unexpectedly, VCRM 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 VCRM will offset losses from the drop in VCRM's long position.| IShares Short vs. iShares Treasury Floating | IShares Short vs. iShares Short Term National | IShares Short vs. iShares Short Maturity | IShares Short vs. iShares Interest Rate |
| VCRM vs. BlackRock High Yield | VCRM vs. iShares iBonds Dec | VCRM vs. iShares Short Maturity | VCRM vs. iShares iBonds Dec |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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