Correlation Between IShares IBonds and IShares Trust

Can any of the company-specific risk be diversified away by investing in both IShares IBonds and IShares Trust 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 Trust 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 Trust, you can compare the effects of market volatilities on IShares IBonds and IShares Trust 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 Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares IBonds and IShares Trust.

Diversification Opportunities for IShares IBonds and IShares Trust

0.23

Correlation Coefficient

IShares IBonds  IShares Trust

Modest diversification

The 3 months correlation between IShares and IShares is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding iShares iBonds Dec and iShares Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Trust 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 Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Trust has no effect on the direction of IShares IBonds i.e., IShares IBonds and IShares Trust go up and down completely randomly.

Pair Corralation between IShares IBonds and IShares Trust

Given the investment horizon of 90 days iShares iBonds Dec is expected to generate 0.36 times more return on investment than IShares Trust. However, iShares iBonds Dec is 2.74 times less risky than IShares Trust. It trades about 0.13 of its potential returns per unit of risk. iShares Trust is currently generating about -0.06 per unit of risk. If you would invest  2,396  in iShares iBonds Dec on September 12, 2024 and sell it today you would earn a total of  16.00  from holding iShares iBonds Dec or generate 0.67% return on investment over 90 days.

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

iShares iBonds Dec  vs.  iShares Trust

iShares iBonds Dec

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares iBonds Dec are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental indicators, IShares IBonds is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

iShares Trust

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with IShares IBonds and IShares Trust

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

The idea behind iShares iBonds Dec and iShares Trust 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.