Correlation Between IShares 20 and IPath Series
Can any of the company-specific risk be diversified away by investing in both IShares 20 and IPath Series 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 20 and IPath Series into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares 20 Year and iPath Series B, you can compare the effects of market volatilities on IShares 20 and IPath Series 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 20 with a short position of IPath Series. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares 20 and IPath Series.
Diversification Opportunities for IShares 20 and IPath Series
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between IShares and IPath is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding iShares 20 Year and iPath Series B in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iPath Series B and IShares 20 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 20 Year are associated (or correlated) with IPath Series. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iPath Series B has no effect on the direction of IShares 20 i.e., IShares 20 and IPath Series go up and down completely randomly.
Pair Corralation between IShares 20 and IPath Series
Considering the 90-day investment horizon iShares 20 Year is expected to generate 0.24 times more return on investment than IPath Series. However, iShares 20 Year is 4.14 times less risky than IPath Series. It trades about -0.07 of its potential returns per unit of risk. iPath Series B is currently generating about -0.11 per unit of risk. If you would invest 9,176 in iShares 20 Year on August 24, 2024 and sell it today you would lose (142.00) from holding iShares 20 Year or give up 1.55% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares 20 Year vs. iPath Series B
Performance |
| Timeline |
| iShares 20 Year |
| iPath Series B |
IShares 20 and IPath Series Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares 20 and IPath Series
The main advantage of trading using opposite IShares 20 and IPath Series positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares 20 position performs unexpectedly, IPath Series 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 IPath Series will offset losses from the drop in IPath Series' long position.| IShares 20 vs. iShares 7 10 Year | IShares 20 vs. iShares 1 3 Year | IShares 20 vs. iShares Russell 2000 | IShares 20 vs. iShares iBoxx Investment |
| IPath Series vs. ProShares Ultra VIX | IPath Series vs. ProShares Short VIX | IPath Series vs. ProShares UltraPro Short | IPath Series vs. iShares 20 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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