Correlation Between IShares TIPS and FlexShares IBoxx
Can any of the company-specific risk be diversified away by investing in both IShares TIPS and FlexShares 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 FlexShares 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 FlexShares iBoxx 5 Year, you can compare the effects of market volatilities on IShares TIPS and FlexShares 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 FlexShares IBoxx. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares TIPS and FlexShares IBoxx.
Diversification Opportunities for IShares TIPS and FlexShares IBoxx
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between IShares and FlexShares is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding iShares TIPS Bond and FlexShares iBoxx 5 Year in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FlexShares iBoxx 5 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 FlexShares IBoxx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FlexShares iBoxx 5 has no effect on the direction of IShares TIPS i.e., IShares TIPS and FlexShares IBoxx go up and down completely randomly.
Pair Corralation between IShares TIPS and FlexShares IBoxx
Considering the 90-day investment horizon iShares TIPS Bond is expected to generate 1.2 times more return on investment than FlexShares IBoxx. However, IShares TIPS is 1.2 times more volatile than FlexShares iBoxx 5 Year. It trades about -0.12 of its potential returns per unit of risk. FlexShares iBoxx 5 Year is currently generating about -0.15 per unit of risk. If you would invest 10,836 in iShares TIPS Bond on August 24, 2024 and sell it today you would lose (67.00) from holding iShares TIPS Bond or give up 0.62% 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. FlexShares iBoxx 5 Year
Performance |
| Timeline |
| iShares TIPS Bond |
| FlexShares iBoxx 5 |
IShares TIPS and FlexShares IBoxx Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares TIPS and FlexShares IBoxx
The main advantage of trading using opposite IShares TIPS and FlexShares IBoxx positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares TIPS position performs unexpectedly, FlexShares 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 FlexShares IBoxx will offset losses from the drop in FlexShares 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 |
| FlexShares IBoxx vs. Schwab Intermediate Term Treasury | FlexShares IBoxx vs. Schwab Aggregate Bond | FlexShares IBoxx vs. Schwab International Equity | FlexShares IBoxx vs. Schwab Emerging Markets |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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