Correlation Between IShares Intermediate and BBSA

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

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

Diversification Opportunities for IShares Intermediate and BBSA

0.0

Correlation Coefficient

IShares Intermediate  BBSA

Pay attention - limited upside

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

Pair Corralation between IShares Intermediate and BBSA

If you would invest  10,367  in iShares Intermediate GovernmentCredit on December 29, 2024 and sell it today you would earn a total of  223.00  from holding iShares Intermediate GovernmentCredit or generate 2.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

iShares Intermediate Governmen  vs.  BBSA

iShares Intermediate

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Intermediate GovernmentCredit are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, IShares Intermediate is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

BBSA

Risk-Adjusted Performance

Very Weak

Over the last 90 days BBSA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, BBSA 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 Intermediate and BBSA

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

The idea behind iShares Intermediate GovernmentCredit and BBSA 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.