Correlation Between IShares IG and IShares Conservative
Can any of the company-specific risk be diversified away by investing in both IShares IG and IShares Conservative 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 Conservative 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 Conservative Strategic, you can compare the effects of market volatilities on IShares IG and IShares Conservative 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 Conservative. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares IG and IShares Conservative.
Diversification Opportunities for IShares IG and IShares Conservative
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IShares and IShares is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding iShares IG Corporate and iShares Conservative Strategic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Conservative 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 Conservative. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Conservative has no effect on the direction of IShares IG i.e., IShares IG and IShares Conservative go up and down completely randomly.
Pair Corralation between IShares IG and IShares Conservative
Assuming the 90 days trading horizon iShares IG Corporate is expected to generate 1.69 times more return on investment than IShares Conservative. However, IShares IG is 1.69 times more volatile than iShares Conservative Strategic. It trades about 0.19 of its potential returns per unit of risk. iShares Conservative Strategic is currently generating about 0.18 per unit of risk. If you would invest 1,992 in iShares IG Corporate on September 1, 2024 and sell it today you would earn a total of 46.00 from holding iShares IG Corporate or generate 2.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
iShares IG Corporate vs. iShares Conservative Strategic
Performance |
| Timeline |
| iShares IG Corporate |
| iShares Conservative |
IShares IG and IShares Conservative Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares IG and IShares Conservative
The main advantage of trading using opposite IShares IG and IShares Conservative positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares IG position performs unexpectedly, IShares Conservative 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 Conservative will offset losses from the drop in IShares Conservative's long position.| IShares IG vs. iShares JP Morgan | IShares IG vs. iShares High Yield | IShares IG vs. iShares 1 10Yr Laddered | IShares IG vs. iShares Canadian HYBrid |
| IShares Conservative vs. iShares Conservative Short | IShares Conservative vs. iShares Short Term | IShares Conservative vs. iShares IG Corporate | IShares Conservative vs. iShares Floating Rate |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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