Correlation Between IShares 1 and US Treasury
Can any of the company-specific risk be diversified away by investing in both IShares 1 and US Treasury 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 US Treasury 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 US Treasury 5, you can compare the effects of market volatilities on IShares 1 and US Treasury 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 US Treasury. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares 1 and US Treasury.
Diversification Opportunities for IShares 1 and US Treasury
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and UFIV is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding iShares 1 3 Year and US Treasury 5 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Treasury 5 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 US Treasury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Treasury 5 has no effect on the direction of IShares 1 i.e., IShares 1 and US Treasury go up and down completely randomly.
Pair Corralation between IShares 1 and US Treasury
Considering the 90-day investment horizon iShares 1 3 Year is expected to generate 0.41 times more return on investment than US Treasury. However, iShares 1 3 Year is 2.46 times less risky than US Treasury. It trades about 0.15 of its potential returns per unit of risk. US Treasury 5 is currently generating about 0.04 per unit of risk. If you would invest 7,883 in iShares 1 3 Year on September 12, 2024 and sell it today you would earn a total of 334.00 from holding iShares 1 3 Year or generate 4.24% 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. US Treasury 5
Performance |
| Timeline |
| iShares 1 3 |
| US Treasury 5 |
IShares 1 and US Treasury Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares 1 and US Treasury
The main advantage of trading using opposite IShares 1 and US Treasury positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares 1 position performs unexpectedly, US Treasury 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 US Treasury will offset losses from the drop in US Treasury'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 |
| US Treasury vs. Bondbloxx ETF Trust | US Treasury vs. Bondbloxx ETF Trust | US Treasury vs. Bondbloxx ETF Trust | US Treasury vs. Bondbloxx ETF Trust |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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