Correlation Between IShares Floating and IShares Core
Can any of the company-specific risk be diversified away by investing in both IShares Floating and IShares Core 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 Floating and IShares Core into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Floating Rate and iShares Core Canadian, you can compare the effects of market volatilities on IShares Floating and IShares Core 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 Floating with a short position of IShares Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Floating and IShares Core.
Diversification Opportunities for IShares Floating and IShares Core
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IShares and IShares is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding iShares Floating Rate and iShares Core Canadian in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core Canadian and IShares Floating 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 Floating Rate are associated (or correlated) with IShares Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Core Canadian has no effect on the direction of IShares Floating i.e., IShares Floating and IShares Core go up and down completely randomly.
Pair Corralation between IShares Floating and IShares Core
Assuming the 90 days trading horizon IShares Floating is expected to generate 1.28 times less return on investment than IShares Core. But when comparing it to its historical volatility, iShares Floating Rate is 3.9 times less risky than IShares Core. It trades about 0.28 of its potential returns per unit of risk. iShares Core Canadian is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1,884 in iShares Core Canadian on August 29, 2024 and sell it today you would earn a total of 6.00 from holding iShares Core Canadian or generate 0.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Floating Rate vs. iShares Core Canadian
Performance |
| Timeline |
| iShares Floating Rate |
| iShares Core Canadian |
IShares Floating and IShares Core Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Floating and IShares Core
The main advantage of trading using opposite IShares Floating and IShares Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Floating position performs unexpectedly, IShares Core 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 Core will offset losses from the drop in IShares Core's long position.| IShares Floating vs. iShares 1 10Yr Laddered | IShares Floating vs. iShares JP Morgan | IShares Floating vs. iShares Convertible Bond | IShares Floating vs. iShares IG Corporate |
| IShares Core vs. Vanguard Total Market | IShares Core vs. iShares Floating Rate | IShares Core vs. iShares High Quality | IShares Core vs. iShares 1 10Yr Laddered |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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