Correlation Between IShares IBoxx and IShares Trust

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

Diversification Opportunities for IShares IBoxx and IShares Trust

0.96

Correlation Coefficient

IShares IBoxx  IShares Trust

Almost no diversification

The 3 months correlation between IShares and IShares is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding iShares iBoxx Investment and iShares Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Trust 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 Investment 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 IBoxx i.e., IShares IBoxx and IShares Trust go up and down completely randomly.

Pair Corralation between IShares IBoxx and IShares Trust

Considering the 90-day investment horizon iShares iBoxx Investment is expected to generate 0.63 times more return on investment than IShares Trust. However, iShares iBoxx Investment is 1.59 times less risky than IShares Trust. It trades about -0.05 of its potential returns per unit of risk. iShares Trust is currently generating about -0.11 per unit of risk. If you would invest  11,166  in iShares iBoxx Investment on September 12, 2024 and sell it today you would lose (171.00) from holding iShares iBoxx Investment or give up 1.53% of portfolio value over 90 days.

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

iShares iBoxx Investment  vs.  iShares Trust

iShares iBoxx Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares iBoxx Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, IShares IBoxx is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

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 fairly stable basic indicators, IShares Trust is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with IShares IBoxx and IShares Trust

The main advantage of trading using opposite IShares IBoxx and IShares Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares IBoxx 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 iBoxx Investment 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.