Correlation Between IShares 25 and IShares Treasury

Can any of the company-specific risk be diversified away by investing in both IShares 25 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 25 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 25 Year and iShares Treasury Floating, you can compare the effects of market volatilities on IShares 25 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 25 with a short position of IShares Treasury. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares 25 and IShares Treasury.

Diversification Opportunities for IShares 25 and IShares Treasury

-0.68

Correlation Coefficient

IShares 25  IShares Treasury

Excellent diversification

The 3 months correlation between IShares and IShares is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding iShares 25 Year and iShares Treasury Floating in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Treasury Floating and IShares 25 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 25 Year 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 Floating has no effect on the direction of IShares 25 i.e., IShares 25 and IShares Treasury go up and down completely randomly.

Pair Corralation between IShares 25 and IShares Treasury

Given the investment horizon of 90 days iShares 25 Year is expected to under-perform the IShares Treasury. In addition to that, IShares 25 is 78.8 times more volatile than iShares Treasury Floating. It trades about -0.06 of its total potential returns per unit of risk. iShares Treasury Floating is currently generating about 0.84 per unit of volatility. If you would invest  5,019  in iShares Treasury Floating on September 21, 2024 and sell it today you would earn a total of  21.00  from holding iShares Treasury Floating or generate 0.42% return on investment over 90 days.

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

iShares 25 Year  vs.  iShares Treasury Floating

iShares 25 Year

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares 25 Year has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Etf's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the ETF investors.

iShares Treasury Floating

Risk-Adjusted Performance

81 of 100

Market Crasher

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Treasury Floating are ranked lower than 81 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy essential indicators, IShares Treasury is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with IShares 25 and IShares Treasury

The main advantage of trading using opposite IShares 25 and IShares Treasury positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares 25 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 25 Year and iShares Treasury Floating 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..