Correlation Between IShares Bloomberg and IShares Commodity

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

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

Diversification Opportunities for IShares Bloomberg and IShares Commodity

0.92

Correlation Coefficient

IShares Bloomberg  IShares Commodity

Almost no diversification

The 3 months correlation between IShares and IShares is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding iShares Bloomberg Roll and iShares Commodity Curve in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Commodity Curve and IShares Bloomberg 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 Bloomberg Roll are associated (or correlated) with IShares Commodity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Commodity Curve has no effect on the direction of IShares Bloomberg i.e., IShares Bloomberg and IShares Commodity go up and down completely randomly.

Pair Corralation between IShares Bloomberg and IShares Commodity

Given the investment horizon of 90 days IShares Bloomberg is expected to generate 1.14 times less return on investment than IShares Commodity. But when comparing it to its historical volatility, iShares Bloomberg Roll is 1.3 times less risky than IShares Commodity. It trades about 0.06 of its potential returns per unit of risk. iShares Commodity Curve is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,001  in iShares Commodity Curve on September 4, 2024 and sell it today you would earn a total of  64.00  from holding iShares Commodity Curve or generate 3.2% return on investment over 90 days.

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

iShares Bloomberg Roll  vs.  iShares Commodity Curve

iShares Bloomberg Roll

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Bloomberg Roll are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental indicators, IShares Bloomberg is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

iShares Commodity Curve

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Commodity Curve are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, IShares Commodity is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with IShares Bloomberg and IShares Commodity

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

The idea behind iShares Bloomberg Roll and iShares Commodity Curve 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.