Correlation Between IShares II and IShares Treasury

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

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

Diversification Opportunities for IShares II and IShares Treasury

0.0

Correlation Coefficient

IShares II  IShares Treasury

Pay attention - limited upside

The 3 months correlation between IShares and IShares is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding iShares II Public and iShares Treasury Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Treasury Bond and IShares II 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 II Public are associated (or correlated) with IShares Treasury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Treasury Bond has no effect on the direction of IShares II i.e., IShares II and IShares Treasury go up and down completely randomly.

Pair Corralation between IShares II and IShares Treasury

If you would invest  5,064  in iShares II Public on October 10, 2024 and sell it today you would earn a total of  29.00  from holding iShares II Public or generate 0.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	5.26%
Values	Daily Returns

iShares II Public  vs.  iShares Treasury Bond

iShares II Public

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares II Public are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, IShares II is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

iShares Treasury Bond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Treasury Bond has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, IShares Treasury is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with IShares II and IShares Treasury

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

The idea behind iShares II Public and iShares Treasury 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.