Correlation Between IShares IBoxx and IShares Core

Can any of the company-specific risk be diversified away by investing in both IShares IBoxx and IShares Core 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 IBoxx and IShares Core into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between iShares iBoxx Investment and iShares Core Aggregate, you can compare the effects of market volatilities on IShares IBoxx and IShares Core 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 IBoxx with a short position of IShares Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares IBoxx and IShares Core.

Diversification Opportunities for IShares IBoxx and IShares Core

0.94

Correlation Coefficient

IShares IBoxx  IShares Core

Almost no diversification

The 3 months correlation between IShares and IShares is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding iShares iBoxx Investment and iShares Core Aggregate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core Aggregate and IShares IBoxx 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 iBoxx Investment are associated (or correlated) with IShares Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Core Aggregate has no effect on the direction of IShares IBoxx i.e., IShares IBoxx and IShares Core go up and down completely randomly.

Pair Corralation between IShares IBoxx and IShares Core

Considering the 90-day investment horizon iShares iBoxx Investment is expected to under-perform the IShares Core. In addition to that, IShares IBoxx is 1.38 times more volatile than iShares Core Aggregate. It trades about -0.08 of its total potential returns per unit of risk. iShares Core Aggregate is currently generating about -0.1 per unit of volatility. If you would invest  9,757  in iShares Core Aggregate on February 2, 2024 and sell it today you would lose (230.00) from holding iShares Core Aggregate or give up 2.36% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

iShares iBoxx Investment  vs.  iShares Core Aggregate

iShares iBoxx Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares iBoxx Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, IShares IBoxx is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

iShares Core Aggregate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Core Aggregate has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, IShares Core is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with IShares IBoxx and IShares Core

The main advantage of trading using opposite IShares IBoxx and IShares Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares IBoxx position performs unexpectedly, IShares Core 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 Core will offset losses from the drop in IShares Core's long position.

The idea behind iShares iBoxx Investment and iShares Core Aggregate 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.

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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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.