Correlation Between IShares IBonds and VCRM

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

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

Diversification Opportunities for IShares IBonds and VCRM

0.66

Correlation Coefficient

IShares IBonds  VCRM

Poor diversification

The 3 months correlation between IShares and VCRM is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding iShares iBonds Dec and VCRM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VCRM and IShares IBonds 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 iBonds Dec are associated (or correlated) with VCRM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VCRM has no effect on the direction of IShares IBonds i.e., IShares IBonds and VCRM go up and down completely randomly.

Pair Corralation between IShares IBonds and VCRM

Given the investment horizon of 90 days iShares iBonds Dec is expected to generate 0.52 times more return on investment than VCRM. However, iShares iBonds Dec is 1.94 times less risky than VCRM. It trades about 0.13 of its potential returns per unit of risk. VCRM is currently generating about -0.11 per unit of risk. If you would invest  2,474  in iShares iBonds Dec on October 7, 2024 and sell it today you would earn a total of  54.00  from holding iShares iBonds Dec or generate 2.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	23.81%
Values	Daily Returns

iShares iBonds Dec  vs.  VCRM

iShares iBonds Dec

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares iBonds Dec are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable primary indicators, IShares IBonds is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

VCRM

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VCRM has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, VCRM is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with IShares IBonds and VCRM

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

The idea behind iShares iBonds Dec and VCRM 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 Global Correlations module to find global opportunities by holding instruments from different markets.