Correlation Between IShares Yield and IShares Interest

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

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

Diversification Opportunities for IShares Yield and IShares Interest

0.56

Correlation Coefficient

IShares Yield  IShares Interest

Very weak diversification

The 3 months correlation between IShares and IShares is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding iShares Yield Optimized and iShares Interest Rate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Interest Rate and IShares Yield 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 Yield Optimized are associated (or correlated) with IShares Interest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Interest Rate has no effect on the direction of IShares Yield i.e., IShares Yield and IShares Interest go up and down completely randomly.

Pair Corralation between IShares Yield and IShares Interest

Given the investment horizon of 90 days iShares Yield Optimized is expected to generate 2.0 times more return on investment than IShares Interest. However, IShares Yield is 2.0 times more volatile than iShares Interest Rate. It trades about 0.08 of its potential returns per unit of risk. iShares Interest Rate is currently generating about 0.1 per unit of risk. If you would invest  2,236  in iShares Yield Optimized on December 4, 2024 and sell it today you would earn a total of  27.00  from holding iShares Yield Optimized or generate 1.21% return on investment over 90 days.

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

iShares Yield Optimized  vs.  iShares Interest Rate

iShares Yield Optimized

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Yield Optimized are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, IShares Yield is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

iShares Interest Rate

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Interest Rate are ranked lower than 7 (%) 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.

Pair Trading with IShares Yield and IShares Interest

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

The idea behind iShares Yield Optimized and iShares Interest Rate 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.