Correlation Between IShares IBoxx and Virtus ETF

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

Diversification Opportunities for IShares IBoxx and Virtus ETF

0.94

Correlation Coefficient

IShares IBoxx  Virtus ETF

Almost no diversification

The 3 months correlation between IShares and Virtus is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding iShares iBoxx High and Virtus ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtus ETF Trust 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 Virtus ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virtus ETF Trust has no effect on the direction of IShares IBoxx i.e., IShares IBoxx and Virtus ETF go up and down completely randomly.

Pair Corralation between IShares IBoxx and Virtus ETF

Considering the 90-day investment horizon IShares IBoxx is expected to generate 1.7 times less return on investment than Virtus ETF. But when comparing it to its historical volatility, iShares iBoxx High is 1.15 times less risky than Virtus ETF. It trades about 0.11 of its potential returns per unit of risk. Virtus ETF Trust is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  2,616  in Virtus ETF Trust on December 25, 2024 and sell it today you would earn a total of  76.00  from holding Virtus ETF Trust or generate 2.91% 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.  Virtus ETF Trust

iShares iBoxx High

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares iBoxx High are ranked lower than 8 (%) 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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

Virtus ETF Trust

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Virtus ETF Trust are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong primary indicators, Virtus ETF 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 IBoxx and Virtus ETF

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

The idea behind iShares iBoxx High and Virtus ETF Trust 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.