Correlation Between IShares 1 and IShares Aaa
Can any of the company-specific risk be diversified away by investing in both IShares 1 and IShares Aaa 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 Aaa 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 Aaa , you can compare the effects of market volatilities on IShares 1 and IShares Aaa 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 Aaa. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares 1 and IShares Aaa.
Diversification Opportunities for IShares 1 and IShares Aaa
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and IShares is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding iShares 1 3 Year and iShares Aaa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Aaa 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 Aaa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Aaa has no effect on the direction of IShares 1 i.e., IShares 1 and IShares Aaa go up and down completely randomly.
Pair Corralation between IShares 1 and IShares Aaa
Considering the 90-day investment horizon IShares 1 is expected to generate 1.36 times less return on investment than IShares Aaa. But when comparing it to its historical volatility, iShares 1 3 Year is 3.3 times less risky than IShares Aaa. It trades about 0.16 of its potential returns per unit of risk. iShares Aaa is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 4,506 in iShares Aaa on September 4, 2024 and sell it today you would earn a total of 282.00 from holding iShares Aaa or generate 6.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares 1 3 Year vs. iShares Aaa
Performance |
| Timeline |
| iShares 1 3 |
| iShares Aaa |
IShares 1 and IShares Aaa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares 1 and IShares Aaa
The main advantage of trading using opposite IShares 1 and IShares Aaa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares 1 position performs unexpectedly, IShares Aaa 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 Aaa will offset losses from the drop in IShares Aaa'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 Aaa vs. iShares iBoxx High | IShares Aaa vs. iShares 1 3 Year | IShares Aaa vs. iShares TIPS Bond | IShares Aaa vs. iShares 7 10 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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