Correlation Between US Treasury and IShares 1
Can any of the company-specific risk be diversified away by investing in both US Treasury and IShares 1 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 US Treasury and IShares 1 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between US Treasury 30 and iShares 1 3 Year, you can compare the effects of market volatilities on US Treasury and IShares 1 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 US Treasury with a short position of IShares 1. Check out your portfolio center. Please also check ongoing floating volatility patterns of US Treasury and IShares 1.
Diversification Opportunities for US Treasury and IShares 1
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between UTHY and IShares is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding US Treasury 30 and iShares 1 3 Year in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares 1 3 and US Treasury 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 US Treasury 30 are associated (or correlated) with IShares 1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares 1 3 has no effect on the direction of US Treasury i.e., US Treasury and IShares 1 go up and down completely randomly.
Pair Corralation between US Treasury and IShares 1
Given the investment horizon of 90 days US Treasury 30 is expected to generate 10.43 times more return on investment than IShares 1. However, US Treasury is 10.43 times more volatile than iShares 1 3 Year. It trades about 0.03 of its potential returns per unit of risk. iShares 1 3 Year is currently generating about 0.28 per unit of risk. If you would invest 4,367 in US Treasury 30 on September 12, 2024 and sell it today you would earn a total of 23.00 from holding US Treasury 30 or generate 0.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
US Treasury 30 vs. iShares 1 3 Year
Performance |
| Timeline |
| US Treasury 30 |
| iShares 1 3 |
US Treasury and IShares 1 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with US Treasury and IShares 1
The main advantage of trading using opposite US Treasury and IShares 1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US Treasury position performs unexpectedly, IShares 1 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 1 will offset losses from the drop in IShares 1's long position.| US Treasury vs. US Treasury 20 | US Treasury vs. US Treasury 5 | US Treasury vs. US Treasury 3 | US Treasury vs. Rbb Fund |
| 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 |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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