Correlation Between IShares Treasury and AB Core

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

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

Diversification Opportunities for IShares Treasury and AB Core

0.89

Correlation Coefficient

IShares Treasury  AB Core

Very poor diversification

The 3 months correlation between IShares and CPLS is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding iShares Treasury Bond and AB Core Plus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AB Core Plus and IShares Treasury 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 Treasury Bond are associated (or correlated) with AB Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AB Core Plus has no effect on the direction of IShares Treasury i.e., IShares Treasury and AB Core go up and down completely randomly.

Pair Corralation between IShares Treasury and AB Core

Given the investment horizon of 90 days iShares Treasury Bond is expected to generate 1.75 times more return on investment than AB Core. However, IShares Treasury is 1.75 times more volatile than AB Core Plus. It trades about 0.07 of its potential returns per unit of risk. AB Core Plus is currently generating about 0.08 per unit of risk. If you would invest  2,235  in iShares Treasury Bond on December 28, 2024 and sell it today you would earn a total of  45.00  from holding iShares Treasury Bond or generate 2.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.36%
Values	Daily Returns

iShares Treasury Bond  vs.  AB Core Plus

iShares Treasury Bond

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Treasury Bond are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. 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.

AB Core Plus

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AB Core Plus are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, AB Core 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 Treasury and AB Core

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

The idea behind iShares Treasury Bond and AB Core Plus 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 Transaction History module to view history of all your transactions and understand their impact on performance.