Correlation Between IShares Intermediate and IShares Core

Can any of the company-specific risk be diversified away by investing in both IShares Intermediate 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 Intermediate 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 Intermediate GovernmentCredit and iShares Core 10, you can compare the effects of market volatilities on IShares Intermediate 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 Intermediate with a short position of IShares Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Intermediate and IShares Core.

Diversification Opportunities for IShares Intermediate and IShares Core

0.98

Correlation Coefficient

IShares Intermediate  IShares Core

Almost no diversification

The 3 months correlation between IShares and IShares is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding iShares Intermediate Governmen and iShares Core 10 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core 10 and IShares Intermediate 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 Intermediate GovernmentCredit 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 10 has no effect on the direction of IShares Intermediate i.e., IShares Intermediate and IShares Core go up and down completely randomly.

Pair Corralation between IShares Intermediate and IShares Core

Considering the 90-day investment horizon iShares Intermediate GovernmentCredit is expected to generate 0.29 times more return on investment than IShares Core. However, iShares Intermediate GovernmentCredit is 3.48 times less risky than IShares Core. It trades about -0.04 of its potential returns per unit of risk. iShares Core 10 is currently generating about -0.03 per unit of risk. If you would invest  10,570  in iShares Intermediate GovernmentCredit on September 3, 2024 and sell it today you would lose (60.00) from holding iShares Intermediate GovernmentCredit or give up 0.57% of portfolio value over 90 days.

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

iShares Intermediate Governmen  vs.  iShares Core 10

iShares Intermediate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Intermediate GovernmentCredit has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, IShares Intermediate is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

iShares Core 10

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Core 10 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, IShares Core is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IShares Intermediate and IShares Core

The main advantage of trading using opposite IShares Intermediate and IShares Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Intermediate 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 Intermediate GovernmentCredit and iShares Core 10 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.