Correlation Between IShares IBonds and IShares Digital

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

By analyzing existing cross correlation between iShares iBonds Dec and iShares Digital Entertainment, you can compare the effects of market volatilities on IShares IBonds and IShares Digital 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 IBonds with a short position of IShares Digital. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares IBonds and IShares Digital.

Diversification Opportunities for IShares IBonds and IShares Digital

0.94

Correlation Coefficient

IShares IBonds  IShares Digital

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 iBonds Dec and iShares Digital Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Digital Ente and IShares IBonds 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 iBonds Dec are associated (or correlated) with IShares Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Digital Ente has no effect on the direction of IShares IBonds i.e., IShares IBonds and IShares Digital go up and down completely randomly.

Pair Corralation between IShares IBonds and IShares Digital

Assuming the 90 days trading horizon IShares IBonds is expected to generate 17.86 times less return on investment than IShares Digital. But when comparing it to its historical volatility, iShares iBonds Dec is 6.35 times less risky than IShares Digital. It trades about 0.14 of its potential returns per unit of risk. iShares Digital Entertainment is currently generating about 0.39 of returns per unit of risk over similar time horizon. If you would invest  732.00  in iShares Digital Entertainment on September 12, 2024 and sell it today you would earn a total of  162.00  from holding iShares Digital Entertainment or generate 22.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

iShares iBonds Dec  vs.  iShares Digital Entertainment

iShares iBonds Dec

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares iBonds Dec are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, IShares IBonds is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

iShares Digital Ente

Risk-Adjusted Performance

30 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Digital Entertainment are ranked lower than 30 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, IShares Digital sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares IBonds and IShares Digital

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

The idea behind iShares iBonds Dec and iShares Digital Entertainment 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..