Correlation Between IShares Agency and AdvisorShares Dorsey

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

By analyzing existing cross correlation between iShares Agency Bond and AdvisorShares Dorsey Wright, you can compare the effects of market volatilities on IShares Agency and AdvisorShares Dorsey 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 Agency with a short position of AdvisorShares Dorsey. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Agency and AdvisorShares Dorsey.

Diversification Opportunities for IShares Agency and AdvisorShares Dorsey

-0.28

Correlation Coefficient

IShares Agency  AdvisorShares Dorsey

Very good diversification

The 3 months correlation between IShares and AdvisorShares is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding iShares Agency Bond and AdvisorShares Dorsey Wright in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AdvisorShares Dorsey and IShares Agency 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 Agency Bond are associated (or correlated) with AdvisorShares Dorsey. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AdvisorShares Dorsey has no effect on the direction of IShares Agency i.e., IShares Agency and AdvisorShares Dorsey go up and down completely randomly.

Pair Corralation between IShares Agency and AdvisorShares Dorsey

Considering the 90-day investment horizon iShares Agency Bond is expected to under-perform the AdvisorShares Dorsey. But the etf apears to be less risky and, when comparing its historical volatility, iShares Agency Bond is 5.47 times less risky than AdvisorShares Dorsey. The etf trades about -0.14 of its potential returns per unit of risk. The AdvisorShares Dorsey Wright is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  6,423  in AdvisorShares Dorsey Wright on September 27, 2024 and sell it today you would earn a total of  599.00  from holding AdvisorShares Dorsey Wright or generate 9.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

iShares Agency Bond  vs.  AdvisorShares Dorsey Wright

iShares Agency Bond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Agency Bond has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, IShares Agency is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

AdvisorShares Dorsey

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AdvisorShares Dorsey Wright are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting fundamental indicators, AdvisorShares Dorsey may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with IShares Agency and AdvisorShares Dorsey

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

The idea behind iShares Agency Bond and AdvisorShares Dorsey Wright 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.