Correlation Between IShares TIPS and IShares IBoxx
Can any of the company-specific risk be diversified away by investing in both IShares TIPS and IShares IBoxx 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 IBoxx 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 iBoxx Investment, you can compare the effects of market volatilities on IShares TIPS and IShares IBoxx 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 IBoxx. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares TIPS and IShares IBoxx.
Diversification Opportunities for IShares TIPS and IShares IBoxx
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 iBoxx Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares iBoxx Investment 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 IBoxx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares iBoxx Investment has no effect on the direction of IShares TIPS i.e., IShares TIPS and IShares IBoxx go up and down completely randomly.
Pair Corralation between IShares TIPS and IShares IBoxx
Considering the 90-day investment horizon iShares TIPS Bond is expected to under-perform the IShares IBoxx. But the etf apears to be less risky and, when comparing its historical volatility, iShares TIPS Bond is 2.09 times less risky than IShares IBoxx. The etf trades about -0.12 of its potential returns per unit of risk. The iShares iBoxx Investment is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest 10,885 in iShares iBoxx Investment on August 24, 2024 and sell it today you would lose (55.00) from holding iShares iBoxx Investment or give up 0.51% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares TIPS Bond vs. iShares iBoxx Investment
Performance |
| Timeline |
| iShares TIPS Bond |
| iShares iBoxx Investment |
IShares TIPS and IShares IBoxx Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares TIPS and IShares IBoxx
The main advantage of trading using opposite IShares TIPS and IShares IBoxx positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares TIPS position performs unexpectedly, IShares IBoxx 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 IBoxx will offset losses from the drop in IShares IBoxx'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 IBoxx vs. iShares iBoxx High | IShares IBoxx vs. iShares 1 3 Year | IShares IBoxx vs. iShares TIPS Bond | IShares IBoxx 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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