Correlation Between IShares Treasury and IShares III

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

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

Diversification Opportunities for IShares Treasury and IShares III

0.47

Correlation Coefficient

IShares Treasury  IShares III

Very weak diversification

The 3 months correlation between IShares and IShares is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding iShares Treasury Bond and iShares III Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares III Public and IShares Treasury 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 Treasury Bond are associated (or correlated) with IShares III. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares III Public has no effect on the direction of IShares Treasury i.e., IShares Treasury and IShares III go up and down completely randomly.

Pair Corralation between IShares Treasury and IShares III

Assuming the 90 days trading horizon iShares Treasury Bond is expected to generate 0.92 times more return on investment than IShares III. However, iShares Treasury Bond is 1.09 times less risky than IShares III. It trades about 0.25 of its potential returns per unit of risk. iShares III Public is currently generating about 0.02 per unit of risk. If you would invest  11,519  in iShares Treasury Bond on September 23, 2024 and sell it today you would earn a total of  760.00  from holding iShares Treasury Bond or generate 6.6% return on investment over 90 days.

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

iShares Treasury Bond  vs.  iShares III Public

iShares Treasury Bond

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Treasury Bond are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, IShares Treasury is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

iShares III Public

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares III Public are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, IShares III 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 Treasury and IShares III

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

The idea behind iShares Treasury Bond and iShares III Public 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.