Correlation Between IShares IG and IShares High
Can any of the company-specific risk be diversified away by investing in both IShares IG and IShares High 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 High 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 High Quality, you can compare the effects of market volatilities on IShares IG and IShares High 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 High. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares IG and IShares High.
Diversification Opportunities for IShares IG and IShares High
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IShares and IShares is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding iShares IG Corporate and iShares High Quality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares High Quality 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 High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares High Quality has no effect on the direction of IShares IG i.e., IShares IG and IShares High go up and down completely randomly.
Pair Corralation between IShares IG and IShares High
Assuming the 90 days trading horizon IShares IG is expected to generate 1.85 times less return on investment than IShares High. In addition to that, IShares IG is 1.49 times more volatile than iShares High Quality. It trades about 0.03 of its total potential returns per unit of risk. iShares High Quality is currently generating about 0.09 per unit of volatility. If you would invest 1,886 in iShares High Quality on August 29, 2024 and sell it today you would earn a total of 13.00 from holding iShares High Quality or generate 0.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares IG Corporate vs. iShares High Quality
Performance |
| Timeline |
| iShares IG Corporate |
| iShares High Quality |
IShares IG and IShares High Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares IG and IShares High
The main advantage of trading using opposite IShares IG and IShares High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares IG position performs unexpectedly, IShares High 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 High will offset losses from the drop in IShares High'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 High vs. iShares 1 10Yr Laddered | IShares High vs. iShares Floating Rate | IShares High vs. iShares IG Corporate | IShares High vs. Global X Active |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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