Correlation Between IShares Govt and LG Gerd

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

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

Diversification Opportunities for IShares Govt and LG Gerd

0.65

Correlation Coefficient

IShares Govt  LG Gerd

Poor diversification

The 3 months correlation between IShares and GERD is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding iShares Govt Bond and LG Gerd Kommer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Gerd Kommer and IShares Govt 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 Govt Bond are associated (or correlated) with LG Gerd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LG Gerd Kommer has no effect on the direction of IShares Govt i.e., IShares Govt and LG Gerd go up and down completely randomly.

Pair Corralation between IShares Govt and LG Gerd

Assuming the 90 days trading horizon iShares Govt Bond is expected to under-perform the LG Gerd. But the etf apears to be less risky and, when comparing its historical volatility, iShares Govt Bond is 1.86 times less risky than LG Gerd. The etf trades about -0.54 of its potential returns per unit of risk. The LG Gerd Kommer is currently generating about -0.17 of returns per unit of risk over similar time horizon. If you would invest  1,217  in LG Gerd Kommer on October 10, 2024 and sell it today you would lose (25.00) from holding LG Gerd Kommer or give up 2.05% of portfolio value over 90 days.

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

iShares Govt Bond  vs.  LG Gerd Kommer

iShares Govt Bond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Govt Bond has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, IShares Govt is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

LG Gerd Kommer

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in LG Gerd Kommer are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, LG Gerd is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with IShares Govt and LG Gerd

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

The idea behind iShares Govt Bond and LG Gerd Kommer 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.