Correlation Between IShares TIPS and IShares ETF
Can any of the company-specific risk be diversified away by investing in both IShares TIPS and IShares ETF 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 TIPS and IShares ETF into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares TIPS Bond and iShares ETF Trust, you can compare the effects of market volatilities on IShares TIPS and IShares ETF 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 TIPS with a short position of IShares ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares TIPS and IShares ETF.
Diversification Opportunities for IShares TIPS and IShares ETF
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and IShares is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding iShares TIPS Bond and iShares ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares ETF Trust and IShares TIPS 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 TIPS Bond are associated (or correlated) with IShares ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares ETF Trust has no effect on the direction of IShares TIPS i.e., IShares TIPS and IShares ETF go up and down completely randomly.
Pair Corralation between IShares TIPS and IShares ETF
Considering the 90-day investment horizon IShares TIPS is expected to generate 1.18 times less return on investment than IShares ETF. In addition to that, IShares TIPS is 1.07 times more volatile than iShares ETF Trust. It trades about 0.04 of its total potential returns per unit of risk. iShares ETF Trust is currently generating about 0.04 per unit of volatility. If you would invest 2,316 in iShares ETF Trust on September 1, 2024 and sell it today you would earn a total of 162.00 from holding iShares ETF Trust or generate 6.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.78% |
| Values | Daily Returns |
iShares TIPS Bond vs. iShares ETF Trust
Performance |
| Timeline |
| iShares TIPS Bond |
| iShares ETF Trust |
IShares TIPS and IShares ETF Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares TIPS and IShares ETF
The main advantage of trading using opposite IShares TIPS and IShares ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares TIPS position performs unexpectedly, IShares ETF 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 ETF will offset losses from the drop in IShares ETF's long position.| IShares TIPS vs. iShares iBoxx Investment | IShares TIPS vs. iShares 1 3 Year | IShares TIPS vs. iShares 7 10 Year | IShares TIPS vs. iShares Core Aggregate |
| IShares ETF vs. Dimensional ETF Trust | IShares ETF vs. JPMorgan Inflation Managed | IShares ETF vs. Goldman Sachs ETF | IShares ETF vs. Dimensional 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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