Correlation Between IShares Govt and Baloise Holding

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

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

Diversification Opportunities for IShares Govt and Baloise Holding

0.46

Correlation Coefficient

IShares Govt  Baloise Holding

Very weak diversification

The 3 months correlation between IShares and Baloise is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding iShares Govt Bond and Baloise Holding AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baloise Holding AG and IShares Govt 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 Govt Bond are associated (or correlated) with Baloise Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baloise Holding AG has no effect on the direction of IShares Govt i.e., IShares Govt and Baloise Holding go up and down completely randomly.

Pair Corralation between IShares Govt and Baloise Holding

Assuming the 90 days trading horizon IShares Govt is expected to generate 7.85 times less return on investment than Baloise Holding. But when comparing it to its historical volatility, iShares Govt Bond is 3.44 times less risky than Baloise Holding. It trades about 0.1 of its potential returns per unit of risk. Baloise Holding AG is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  16,410  in Baloise Holding AG on December 29, 2024 and sell it today you would earn a total of  2,560  from holding Baloise Holding AG or generate 15.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	80.65%
Values	Daily Returns

iShares Govt Bond  vs.  Baloise Holding AG

iShares Govt Bond

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Govt Bond are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, IShares Govt is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Baloise Holding AG

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Baloise Holding AG are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Baloise Holding showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares Govt and Baloise Holding

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

The idea behind iShares Govt Bond and Baloise Holding AG 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.