Correlation Between IShares IBoxx and VanEck Fallen

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

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

Diversification Opportunities for IShares IBoxx and VanEck Fallen

0.93

Correlation Coefficient

IShares IBoxx  VanEck Fallen

Almost no diversification

The 3 months correlation between IShares and VanEck is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding iShares iBoxx High and VanEck Fallen Angel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Fallen Angel and IShares IBoxx 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 iBoxx High are associated (or correlated) with VanEck Fallen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Fallen Angel has no effect on the direction of IShares IBoxx i.e., IShares IBoxx and VanEck Fallen go up and down completely randomly.

Pair Corralation between IShares IBoxx and VanEck Fallen

Considering the 90-day investment horizon IShares IBoxx is expected to generate 1.58 times less return on investment than VanEck Fallen. But when comparing it to its historical volatility, iShares iBoxx High is 1.0 times less risky than VanEck Fallen. It trades about 0.07 of its potential returns per unit of risk. VanEck Fallen Angel is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  2,833  in VanEck Fallen Angel on December 28, 2024 and sell it today you would earn a total of  50.00  from holding VanEck Fallen Angel or generate 1.76% return on investment over 90 days.

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

iShares iBoxx High  vs.  VanEck Fallen Angel

iShares iBoxx High

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares iBoxx High are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, IShares IBoxx is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

VanEck Fallen Angel

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Fallen Angel are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent technical and fundamental indicators, VanEck Fallen is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with IShares IBoxx and VanEck Fallen

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

The idea behind iShares iBoxx High and VanEck Fallen Angel 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.