Correlation Between IShares IG and IShares 1
Can any of the company-specific risk be diversified away by investing in both IShares IG 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 IShares IG and IShares 1 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares IG Corporate and iShares 1 5 Year, you can compare the effects of market volatilities on IShares IG 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 IShares IG with a short position of IShares 1. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares IG and IShares 1.
Diversification Opportunities for IShares IG and IShares 1
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between IShares and IShares is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding iShares IG Corporate and iShares 1 5 Year in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares 1 5 and IShares IG 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 IG Corporate 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 5 has no effect on the direction of IShares IG i.e., IShares IG and IShares 1 go up and down completely randomly.
Pair Corralation between IShares IG and IShares 1
Assuming the 90 days trading horizon iShares IG Corporate is expected to under-perform the IShares 1. In addition to that, IShares IG is 3.31 times more volatile than iShares 1 5 Year. It trades about -0.05 of its total potential returns per unit of risk. iShares 1 5 Year is currently generating about -0.06 per unit of volatility. If you would invest 1,814 in iShares 1 5 Year on August 27, 2024 and sell it today you would lose (3.00) from holding iShares 1 5 Year or give up 0.17% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares IG Corporate vs. iShares 1 5 Year
Performance |
| Timeline |
| iShares IG Corporate |
| iShares 1 5 |
IShares IG and IShares 1 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares IG and IShares 1
The main advantage of trading using opposite IShares IG and IShares 1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares IG 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.| IShares IG vs. Mackenzie High Yield | IShares IG vs. Mackenzie Core Plus | IShares IG vs. Mackenzie Canadian Aggregate | IShares IG vs. Mackenzie Core Plus |
| IShares 1 vs. Mackenzie Canadian Aggregate | IShares 1 vs. Mackenzie Core Plus | IShares 1 vs. Mackenzie Investment Grade | IShares 1 vs. Mackenzie Core Plus |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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