Correlation Between US Treasury and IShares Trust
Can any of the company-specific risk be diversified away by investing in both US Treasury and IShares Trust 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 US Treasury and IShares Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between US Treasury 12 and iShares Trust, you can compare the effects of market volatilities on US Treasury and IShares Trust 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 US Treasury with a short position of IShares Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of US Treasury and IShares Trust.
Diversification Opportunities for US Treasury and IShares Trust
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between OBIL and IShares is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding US Treasury 12 and iShares Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Trust and US Treasury 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 US Treasury 12 are associated (or correlated) with IShares Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Trust has no effect on the direction of US Treasury i.e., US Treasury and IShares Trust go up and down completely randomly.
Pair Corralation between US Treasury and IShares Trust
Given the investment horizon of 90 days US Treasury 12 is expected to generate 0.52 times more return on investment than IShares Trust. However, US Treasury 12 is 1.93 times less risky than IShares Trust. It trades about 0.3 of its potential returns per unit of risk. iShares Trust is currently generating about 0.04 per unit of risk. If you would invest 4,567 in US Treasury 12 on September 14, 2024 and sell it today you would earn a total of 438.00 from holding US Treasury 12 or generate 9.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 5.25% |
| Values | Daily Returns |
US Treasury 12 vs. iShares Trust
Performance |
| Timeline |
| US Treasury 12 |
| iShares Trust |
US Treasury and IShares Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with US Treasury and IShares Trust
The main advantage of trading using opposite US Treasury and IShares Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US Treasury position performs unexpectedly, IShares Trust 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 Trust will offset losses from the drop in IShares Trust's long position.| US Treasury vs. Rbb Fund | US Treasury vs. Rbb Fund | US Treasury vs. Rbb Fund | US Treasury vs. US Treasury 6 |
| IShares Trust vs. Vanguard Total Stock | IShares Trust vs. SPDR SP 500 | IShares Trust vs. iShares Core SP | IShares Trust vs. Vanguard Total Bond |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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