Correlation Between IShares 1 and IShares Core
Can any of the company-specific risk be diversified away by investing in both IShares 1 and IShares Core 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 1 and IShares Core into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares 1 3 Year and iShares Core Aggregate, you can compare the effects of market volatilities on IShares 1 and IShares Core 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 1 with a short position of IShares Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares 1 and IShares Core.
Diversification Opportunities for IShares 1 and IShares Core
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IShares and IShares is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding iShares 1 3 Year and iShares Core Aggregate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core Aggregate and IShares 1 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 1 3 Year are associated (or correlated) with IShares Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Core Aggregate has no effect on the direction of IShares 1 i.e., IShares 1 and IShares Core go up and down completely randomly.
Pair Corralation between IShares 1 and IShares Core
Considering the 90-day investment horizon iShares 1 3 Year is expected to generate 0.26 times more return on investment than IShares Core. However, iShares 1 3 Year is 3.81 times less risky than IShares Core. It trades about -0.09 of its potential returns per unit of risk. iShares Core Aggregate is currently generating about -0.1 per unit of risk. If you would invest 8,218 in iShares 1 3 Year on August 23, 2024 and sell it today you would lose (14.00) from holding iShares 1 3 Year or give up 0.17% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares 1 3 Year vs. iShares Core Aggregate
Performance |
| Timeline |
| iShares 1 3 |
| iShares Core Aggregate |
IShares 1 and IShares Core Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares 1 and IShares Core
The main advantage of trading using opposite IShares 1 and IShares Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares 1 position performs unexpectedly, IShares Core 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 Core will offset losses from the drop in IShares Core's long position.| IShares 1 vs. iShares 7 10 Year | IShares 1 vs. iShares iBoxx Investment | IShares 1 vs. iShares TIPS Bond | IShares 1 vs. iShares 3 7 Year |
| IShares Core vs. iShares MSCI EAFE | IShares Core vs. iShares iBoxx Investment | IShares Core vs. iShares TIPS Bond | IShares Core vs. iShares 1 3 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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