Correlation Between VanEck Fallen and IShares IBonds

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

By analyzing existing cross correlation between VanEck Fallen Angel and iShares iBonds 2028, you can compare the effects of market volatilities on VanEck Fallen and IShares IBonds 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 VanEck Fallen with a short position of IShares IBonds. Check out your portfolio center. Please also check ongoing floating volatility patterns of VanEck Fallen and IShares IBonds.

Diversification Opportunities for VanEck Fallen and IShares IBonds

0.8

Correlation Coefficient

VanEck Fallen  IShares IBonds

Very poor diversification

The 3 months correlation between VanEck and IShares is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Fallen Angel and iShares iBonds 2028 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares iBonds 2028 and VanEck Fallen 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 VanEck Fallen Angel are associated (or correlated) with IShares IBonds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares iBonds 2028 has no effect on the direction of VanEck Fallen i.e., VanEck Fallen and IShares IBonds go up and down completely randomly.

Pair Corralation between VanEck Fallen and IShares IBonds

Given the investment horizon of 90 days VanEck Fallen Angel is expected to under-perform the IShares IBonds. In addition to that, VanEck Fallen is 1.21 times more volatile than iShares iBonds 2028. It trades about -0.1 of its total potential returns per unit of risk. iShares iBonds 2028 is currently generating about -0.05 per unit of volatility. If you would invest  2,339  in iShares iBonds 2028 on September 25, 2024 and sell it today you would lose (7.00) from holding iShares iBonds 2028 or give up 0.3% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.24%
Values	Daily Returns

VanEck Fallen Angel  vs.  iShares iBonds 2028

VanEck Fallen Angel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VanEck Fallen Angel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, VanEck Fallen is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

iShares iBonds 2028

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares iBonds 2028 are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical indicators, IShares IBonds is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with VanEck Fallen and IShares IBonds

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

The idea behind VanEck Fallen Angel and iShares iBonds 2028 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.