Correlation Between IShares Short and IShares GovernmentCredit

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

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

Diversification Opportunities for IShares Short and IShares GovernmentCredit

-0.7

Correlation Coefficient

IShares Short  IShares GovernmentCredit

Excellent diversification

The 3 months correlation between IShares and IShares is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding iShares Short Treasury and iShares GovernmentCredit Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IShares GovernmentCredit 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 Treasury are associated (or correlated) with IShares GovernmentCredit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IShares GovernmentCredit has no effect on the direction of IShares Short i.e., IShares Short and IShares GovernmentCredit go up and down completely randomly.

Pair Corralation between IShares Short and IShares GovernmentCredit

Considering the 90-day investment horizon iShares Short Treasury is expected to generate 0.05 times more return on investment than IShares GovernmentCredit. However, iShares Short Treasury is 20.51 times less risky than IShares GovernmentCredit. It trades about 1.14 of its potential returns per unit of risk. iShares GovernmentCredit Bond is currently generating about -0.12 per unit of risk. If you would invest  10,908  in iShares Short Treasury on September 14, 2024 and sell it today you would earn a total of  119.00  from holding iShares Short Treasury or generate 1.09% return on investment over 90 days.

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

iShares Short Treasury  vs.  iShares GovernmentCredit Bond

iShares Short Treasury

Risk-Adjusted Performance

89 of 100

Market Crasher

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Short Treasury are ranked lower than 89 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable technical indicators, IShares Short is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

IShares GovernmentCredit

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with IShares Short and IShares GovernmentCredit

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

The idea behind iShares Short Treasury and iShares GovernmentCredit Bond 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .