Correlation Between IShares IBonds and IShares 25

Can any of the company-specific risk be diversified away by investing in both IShares IBonds and IShares 25 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 IShares 25 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 iShares 25 Year, you can compare the effects of market volatilities on IShares IBonds and IShares 25 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 IShares 25. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares IBonds and IShares 25.

Diversification Opportunities for IShares IBonds and IShares 25

0.92

Correlation Coefficient

IShares IBonds  IShares 25

Almost no diversification

The 3 months correlation between IShares and IShares is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding iShares iBonds Dec and iShares 25 Year in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares 25 Year 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 IShares 25. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares 25 Year has no effect on the direction of IShares IBonds i.e., IShares IBonds and IShares 25 go up and down completely randomly.

Pair Corralation between IShares IBonds and IShares 25

Given the investment horizon of 90 days iShares iBonds Dec is expected to generate 0.16 times more return on investment than IShares 25. However, iShares iBonds Dec is 6.08 times less risky than IShares 25. It trades about -0.01 of its potential returns per unit of risk. iShares 25 Year is currently generating about -0.06 per unit of risk. If you would invest  1,919  in iShares iBonds Dec on September 21, 2024 and sell it today you would lose (1.00) from holding iShares iBonds Dec or give up 0.05% of portfolio value over 90 days.

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

iShares iBonds Dec  vs.  iShares 25 Year

iShares iBonds Dec

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares iBonds Dec has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, IShares IBonds is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

iShares 25 Year

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares 25 Year has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Etf's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the ETF investors.

Pair Trading with IShares IBonds and IShares 25

The main advantage of trading using opposite IShares IBonds and IShares 25 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares IBonds position performs unexpectedly, IShares 25 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 IShares 25 will offset losses from the drop in IShares 25's long position.

The idea behind iShares iBonds Dec and iShares 25 Year 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 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.