Correlation Between IShares Aaa and IShares IBoxx
Can any of the company-specific risk be diversified away by investing in both IShares Aaa and IShares IBoxx 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 Aaa and IShares IBoxx into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IShares Aaa and IShares IBoxx Investment, you can compare the effects of market volatilities on IShares Aaa and IShares IBoxx 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 Aaa with a short position of IShares IBoxx. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Aaa and IShares IBoxx.
Diversification Opportunities for IShares Aaa and IShares IBoxx
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IShares and IShares is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding IShares Aaa - and IShares IBoxx Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IShares IBoxx Investment and IShares Aaa 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 Aaa are associated (or correlated) with IShares IBoxx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IShares IBoxx Investment has no effect on the direction of IShares Aaa i.e., IShares Aaa and IShares IBoxx go up and down completely randomly.
Pair Corralation between IShares Aaa and IShares IBoxx
Given the investment horizon of 90 days IShares Aaa is expected to generate 1.34 times less return on investment than IShares IBoxx. But when comparing it to its historical volatility, IShares Aaa is 1.21 times less risky than IShares IBoxx. It trades about 0.02 of its potential returns per unit of risk. IShares IBoxx Investment is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 10,352 in IShares IBoxx Investment on December 29, 2023 and sell it today you would earn a total of 550.00 from holding IShares IBoxx Investment or generate 5.31% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
IShares Aaa - vs. IShares IBoxx Investment
Performance |
Timeline |
IShares Aaa - |
IShares IBoxx Investment |
IShares Aaa and IShares IBoxx Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with IShares Aaa and IShares IBoxx
The main advantage of trading using opposite IShares Aaa and IShares IBoxx positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Aaa position performs unexpectedly, IShares IBoxx 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 IBoxx will offset losses from the drop in IShares IBoxx's long position.IShares Aaa vs. Barloworld Ltd ADR | IShares Aaa vs. Morningstar Unconstrained Allocation | IShares Aaa vs. High Yield Municipal Fund | IShares Aaa vs. Via Renewables |
IShares IBoxx vs. Barloworld Ltd ADR | IShares IBoxx vs. Morningstar Unconstrained Allocation | IShares IBoxx vs. High Yield Municipal Fund | IShares IBoxx vs. Via Renewables |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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