Correlation Between IShares GovernmentCredit and ClearShares Ultra

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

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

Diversification Opportunities for IShares GovernmentCredit and ClearShares Ultra

-0.68

Correlation Coefficient

IShares GovernmentCredit  ClearShares Ultra

Excellent diversification

The 3 months correlation between IShares and ClearShares is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding iShares GovernmentCredit Bond and ClearShares Ultra Short Maturi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ClearShares Ultra Short and IShares GovernmentCredit 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 GovernmentCredit Bond are associated (or correlated) with ClearShares Ultra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ClearShares Ultra Short has no effect on the direction of IShares GovernmentCredit i.e., IShares GovernmentCredit and ClearShares Ultra go up and down completely randomly.

Pair Corralation between IShares GovernmentCredit and ClearShares Ultra

Considering the 90-day investment horizon iShares GovernmentCredit Bond is expected to generate 18.73 times more return on investment than ClearShares Ultra. However, IShares GovernmentCredit is 18.73 times more volatile than ClearShares Ultra Short Maturity. It trades about 0.09 of its potential returns per unit of risk. ClearShares Ultra Short Maturity is currently generating about 1.02 per unit of risk. If you would invest  10,276  in iShares GovernmentCredit Bond on September 19, 2024 and sell it today you would earn a total of  63.00  from holding iShares GovernmentCredit Bond or generate 0.61% return on investment over 90 days.

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

iShares GovernmentCredit Bond  vs.  ClearShares Ultra Short Maturi

IShares GovernmentCredit

Risk-Adjusted Performance

0 of 100

Very Weak

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

ClearShares Ultra Short

Risk-Adjusted Performance

84 of 100

Market Crasher

Compared to the overall equity markets, risk-adjusted returns on investments in ClearShares Ultra Short Maturity are ranked lower than 84 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, ClearShares Ultra is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with IShares GovernmentCredit and ClearShares Ultra

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

The idea behind iShares GovernmentCredit Bond and ClearShares Ultra Short Maturity 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.