Correlation Between IShares 1 and IShares Intermediate

Can any of the company-specific risk be diversified away by investing in both IShares 1 and IShares Intermediate 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 1 and IShares Intermediate into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between iShares 1 3 Year and iShares Intermediate GovernmentCredit, you can compare the effects of market volatilities on IShares 1 and IShares Intermediate 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 1 with a short position of IShares Intermediate. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares 1 and IShares Intermediate.

Diversification Opportunities for IShares 1 and IShares Intermediate

0.84

Correlation Coefficient

IShares 1  IShares Intermediate

Very poor diversification

The 3 months correlation between IShares and IShares is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding iShares 1 3 Year and iShares Intermediate Governmen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Intermediate and IShares 1 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 1 3 Year are associated (or correlated) with IShares Intermediate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Intermediate has no effect on the direction of IShares 1 i.e., IShares 1 and IShares Intermediate go up and down completely randomly.

Pair Corralation between IShares 1 and IShares Intermediate

Given the investment horizon of 90 days iShares 1 3 Year is expected to under-perform the IShares Intermediate. In addition to that, IShares 1 is 2.09 times more volatile than iShares Intermediate GovernmentCredit. It trades about -0.18 of its total potential returns per unit of risk. iShares Intermediate GovernmentCredit is currently generating about -0.12 per unit of volatility. If you would invest  10,631  in iShares Intermediate GovernmentCredit on September 18, 2024 and sell it today you would lose (155.00) from holding iShares Intermediate GovernmentCredit or give up 1.46% of portfolio value over 90 days.

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

iShares 1 3 Year  vs.  iShares Intermediate Governmen

iShares 1 3

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares 1 3 Year has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical indicators, IShares 1 is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

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.

Pair Trading with IShares 1 and IShares Intermediate

The main advantage of trading using opposite IShares 1 and IShares Intermediate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares 1 position performs unexpectedly, IShares Intermediate 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 Intermediate will offset losses from the drop in IShares Intermediate's long position.

The idea behind iShares 1 3 Year and iShares Intermediate GovernmentCredit 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.

Check out your portfolio center.

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.