Correlation Between IShares IBoxx and Virtus InfraCap

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

By analyzing existing cross correlation between iShares iBoxx High and Virtus InfraCap Preferred, you can compare the effects of market volatilities on IShares IBoxx and Virtus InfraCap 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 Virtus InfraCap. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares IBoxx and Virtus InfraCap.

Diversification Opportunities for IShares IBoxx and Virtus InfraCap

0.41

Correlation Coefficient

IShares IBoxx  Virtus InfraCap

Very weak diversification

The 3 months correlation between IShares and Virtus is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding iShares iBoxx High and Virtus InfraCap Preferred in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtus InfraCap Preferred 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 High are associated (or correlated) with Virtus InfraCap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virtus InfraCap Preferred has no effect on the direction of IShares IBoxx i.e., IShares IBoxx and Virtus InfraCap go up and down completely randomly.

Pair Corralation between IShares IBoxx and Virtus InfraCap

Considering the 90-day investment horizon iShares iBoxx High is expected to generate 0.58 times more return on investment than Virtus InfraCap. However, iShares iBoxx High is 1.73 times less risky than Virtus InfraCap. It trades about 0.0 of its potential returns per unit of risk. Virtus InfraCap Preferred is currently generating about -0.05 per unit of risk. If you would invest  7,856  in iShares iBoxx High on September 22, 2024 and sell it today you would earn a total of  2.00  from holding iShares iBoxx High or generate 0.03% return on investment over 90 days.

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

iShares iBoxx High  vs.  Virtus InfraCap Preferred

iShares iBoxx High

Risk-Adjusted Performance

0 of 100

Very Weak

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

Virtus InfraCap Preferred

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Virtus InfraCap Preferred has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Virtus InfraCap is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IShares IBoxx and Virtus InfraCap

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

The idea behind iShares iBoxx High and Virtus InfraCap Preferred 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.