Correlation Between IShares Edge and IShares Convertible
Can any of the company-specific risk be diversified away by investing in both IShares Edge 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 Edge 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 Edge MSCI and iShares Convertible Bond, you can compare the effects of market volatilities on IShares Edge 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 Edge with a short position of IShares Convertible. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Edge and IShares Convertible.
Diversification Opportunities for IShares Edge and IShares Convertible
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between IShares and IShares is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding iShares Edge 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 Edge 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 Edge 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 Edge i.e., IShares Edge and IShares Convertible go up and down completely randomly.
Pair Corralation between IShares Edge and IShares Convertible
Assuming the 90 days trading horizon iShares Edge MSCI is expected to generate 0.79 times more return on investment than IShares Convertible. However, iShares Edge MSCI is 1.26 times less risky than IShares Convertible. It trades about 0.08 of its potential returns per unit of risk. iShares Convertible Bond is currently generating about 0.05 per unit of risk. If you would invest 3,073 in iShares Edge MSCI on August 26, 2024 and sell it today you would earn a total of 803.00 from holding iShares Edge MSCI or generate 26.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Edge MSCI vs. iShares Convertible Bond
Performance |
| Timeline |
| iShares Edge MSCI |
| iShares Convertible Bond |
IShares Edge and IShares Convertible Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Edge and IShares Convertible
The main advantage of trading using opposite IShares Edge and IShares Convertible positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Edge 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.The idea behind iShares Edge MSCI and iShares Convertible Bond pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| IShares Convertible vs. BMO Mid Federal | IShares Convertible vs. BMO Short Corporate | IShares Convertible vs. BMO Emerging Markets | IShares Convertible vs. BMO Long Corporate |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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