Correlation Between IShares Interest and IShares Treasury

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

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

Diversification Opportunities for IShares Interest and IShares Treasury

0.94

Correlation Coefficient

IShares Interest  IShares Treasury

Almost no diversification

The 3 months correlation between IShares and IShares is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding iShares Interest Rate and iShares Treasury Floating in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Treasury Floating and IShares Interest 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 Interest Rate are associated (or correlated) with IShares Treasury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Treasury Floating has no effect on the direction of IShares Interest i.e., IShares Interest and IShares Treasury go up and down completely randomly.

Pair Corralation between IShares Interest and IShares Treasury

Given the investment horizon of 90 days iShares Interest Rate is expected to generate 9.4 times more return on investment than IShares Treasury. However, IShares Interest is 9.4 times more volatile than iShares Treasury Floating. It trades about 0.33 of its potential returns per unit of risk. iShares Treasury Floating is currently generating about 1.12 per unit of risk. If you would invest  9,039  in iShares Interest Rate on September 12, 2024 and sell it today you would earn a total of  305.00  from holding iShares Interest Rate or generate 3.37% return on investment over 90 days.

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

iShares Interest Rate  vs.  iShares Treasury Floating

iShares Interest Rate

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Interest Rate are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental indicators, IShares Interest is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

iShares Treasury Floating

Risk-Adjusted Performance

88 of 100

Market Crasher

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Treasury Floating are ranked lower than 88 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy essential indicators, IShares Treasury is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with IShares Interest and IShares Treasury

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

The idea behind iShares Interest Rate and iShares Treasury Floating 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.