Correlation Between IShares Treasury and IShares Core

Can any of the company-specific risk be diversified away by investing in both IShares Treasury and IShares 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 IShares 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 iShares Core Total, you can compare the effects of market volatilities on IShares Treasury and IShares 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 IShares Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Treasury and IShares Core.

Diversification Opportunities for IShares Treasury and IShares Core

0.99

Correlation Coefficient

IShares Treasury  IShares Core

No risk reduction

The 3 months correlation between IShares and IShares is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding iShares Treasury Bond and iShares Core Total in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core Total 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 IShares Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Core Total has no effect on the direction of IShares Treasury i.e., IShares Treasury and IShares Core go up and down completely randomly.

Pair Corralation between IShares Treasury and IShares Core

Given the investment horizon of 90 days iShares Treasury Bond is expected to under-perform the IShares Core. In addition to that, IShares Treasury is 1.02 times more volatile than iShares Core Total. It trades about -0.04 of its total potential returns per unit of risk. iShares Core Total is currently generating about -0.01 per unit of volatility. If you would invest  4,617  in iShares Core Total on August 30, 2024 and sell it today you would lose (12.00) from holding iShares Core Total or give up 0.26% of portfolio value over 90 days.

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

iShares Treasury Bond  vs.  iShares Core Total

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.

iShares Core Total

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Core Total has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, IShares Core is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IShares Treasury and IShares Core

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

The idea behind iShares Treasury Bond and iShares Core Total 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.