Correlation Between IShares Core and IShares Convertible
Can any of the company-specific risk be diversified away by investing in both IShares Core and IShares Convertible 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 Core and IShares Convertible into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Core MSCI and iShares Convertible Bond, you can compare the effects of market volatilities on IShares Core and IShares Convertible 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 Core with a short position of IShares Convertible. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and IShares Convertible.
Diversification Opportunities for IShares Core and IShares Convertible
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IShares and IShares is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core MSCI and iShares Convertible Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Convertible Bond and IShares Core 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 Core MSCI are associated (or correlated) with IShares Convertible. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Convertible Bond has no effect on the direction of IShares Core i.e., IShares Core and IShares Convertible go up and down completely randomly.
Pair Corralation between IShares Core and IShares Convertible
Assuming the 90 days trading horizon iShares Core MSCI is expected to generate 1.77 times more return on investment than IShares Convertible. However, IShares Core is 1.77 times more volatile than iShares Convertible Bond. It trades about 0.06 of its potential returns per unit of risk. iShares Convertible Bond is currently generating about 0.1 per unit of risk. If you would invest 2,751 in iShares Core MSCI on August 29, 2024 and sell it today you would earn a total of 166.00 from holding iShares Core MSCI or generate 6.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Core MSCI vs. iShares Convertible Bond
Performance |
| Timeline |
| iShares Core MSCI |
| iShares Convertible Bond |
IShares Core and IShares Convertible Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Core and IShares Convertible
The main advantage of trading using opposite IShares Core and IShares Convertible positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Core position performs unexpectedly, IShares Convertible 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 Convertible will offset losses from the drop in IShares Convertible's long position.| IShares Core vs. iShares Core MSCI | IShares Core vs. iShares Core SP | IShares Core vs. Vanguard Total Market | IShares Core vs. Vanguard FTSE Canada |
| IShares Convertible vs. Purpose Monthly Income | IShares Convertible vs. Purpose Core Dividend | IShares Convertible vs. Purpose Tactical Hedged | IShares Convertible vs. Purpose Best Ideas |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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