Correlation Between IShares Short and VanEck Short

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

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

Diversification Opportunities for IShares Short and VanEck Short

0.52

Correlation Coefficient

IShares Short  VanEck Short

Very weak diversification

The 3 months correlation between IShares and VanEck is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding iShares Short Maturity and VanEck Short Muni in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Short Muni and IShares Short 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 Short Maturity are associated (or correlated) with VanEck Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Short Muni has no effect on the direction of IShares Short i.e., IShares Short and VanEck Short go up and down completely randomly.

Pair Corralation between IShares Short and VanEck Short

Given the investment horizon of 90 days iShares Short Maturity is expected to generate 0.6 times more return on investment than VanEck Short. However, iShares Short Maturity is 1.68 times less risky than VanEck Short. It trades about 0.1 of its potential returns per unit of risk. VanEck Short Muni is currently generating about -0.06 per unit of risk. If you would invest  4,973  in iShares Short Maturity on September 24, 2024 and sell it today you would earn a total of  21.00  from holding iShares Short Maturity or generate 0.42% return on investment over 90 days.

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

iShares Short Maturity  vs.  VanEck Short Muni

iShares Short Maturity

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Short Maturity are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, IShares Short is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

VanEck Short Muni

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VanEck Short Muni has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong primary indicators, VanEck Short is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IShares Short and VanEck Short

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

The idea behind iShares Short Maturity and VanEck Short Muni 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.