Correlation Between IShares Trust and IShares IBonds

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

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

Diversification Opportunities for IShares Trust and IShares IBonds

0.97

Correlation Coefficient

IShares Trust  IShares IBonds

Almost no diversification

The 3 months correlation between IShares and IShares is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding iShares Trust and iShares iBonds Dec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares iBonds Dec and IShares Trust 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 Trust are associated (or correlated) with IShares IBonds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares iBonds Dec has no effect on the direction of IShares Trust i.e., IShares Trust and IShares IBonds go up and down completely randomly.

Pair Corralation between IShares Trust and IShares IBonds

Given the investment horizon of 90 days iShares Trust is expected to under-perform the IShares IBonds. In addition to that, IShares Trust is 1.3 times more volatile than iShares iBonds Dec. It trades about -0.09 of its total potential returns per unit of risk. iShares iBonds Dec is currently generating about -0.08 per unit of volatility. If you would invest  2,527  in iShares iBonds Dec on September 15, 2024 and sell it today you would lose (21.00) from holding iShares iBonds Dec or give up 0.83% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.46%
Values	Daily Returns

iShares Trust   vs.  iShares iBonds Dec

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. In spite of comparatively stable fundamental indicators, IShares Trust is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

iShares iBonds Dec

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares iBonds Dec has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, IShares IBonds is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with IShares Trust and IShares IBonds

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

The idea behind iShares Trust and iShares iBonds Dec 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.