Correlation Between IShares Treasury and IShares MSCI

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

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

Diversification Opportunities for IShares Treasury and IShares MSCI

0.92

Correlation Coefficient

IShares Treasury  IShares MSCI

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 Treasury Bond and iShares MSCI USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI USA and IShares Treasury 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 Treasury Bond are associated (or correlated) with IShares MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares MSCI USA has no effect on the direction of IShares Treasury i.e., IShares Treasury and IShares MSCI go up and down completely randomly.

Pair Corralation between IShares Treasury and IShares MSCI

Assuming the 90 days trading horizon iShares Treasury Bond is expected to generate 0.55 times more return on investment than IShares MSCI. However, iShares Treasury Bond is 1.81 times less risky than IShares MSCI. It trades about 0.23 of its potential returns per unit of risk. iShares MSCI USA is currently generating about 0.13 per unit of risk. If you would invest  11,529  in iShares Treasury Bond on September 17, 2024 and sell it today you would earn a total of  661.00  from holding iShares Treasury Bond or generate 5.73% return on investment over 90 days.

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

iShares Treasury Bond  vs.  iShares MSCI USA

iShares Treasury Bond

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Treasury Bond are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, IShares Treasury is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

iShares MSCI USA

Risk-Adjusted Performance

9 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI USA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, IShares MSCI is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with IShares Treasury and IShares MSCI

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

The idea behind iShares Treasury Bond and iShares MSCI USA 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.