Correlation Between IShares Ultra and BlackRock AAA

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

By analyzing existing cross correlation between iShares Ultra Short Term and BlackRock AAA CLO, you can compare the effects of market volatilities on IShares Ultra and BlackRock AAA 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 Ultra with a short position of BlackRock AAA. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Ultra and BlackRock AAA.

Diversification Opportunities for IShares Ultra and BlackRock AAA

0.99

Correlation Coefficient

IShares Ultra  BlackRock AAA

No risk reduction

The 3 months correlation between IShares and BlackRock is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding iShares Ultra Short Term and BlackRock AAA CLO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlackRock AAA CLO and IShares Ultra 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 Ultra Short Term are associated (or correlated) with BlackRock AAA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BlackRock AAA CLO has no effect on the direction of IShares Ultra i.e., IShares Ultra and BlackRock AAA go up and down completely randomly.

Pair Corralation between IShares Ultra and BlackRock AAA

Given the investment horizon of 90 days IShares Ultra is expected to generate 1.53 times less return on investment than BlackRock AAA. But when comparing it to its historical volatility, iShares Ultra Short Term is 1.76 times less risky than BlackRock AAA. It trades about 0.57 of its potential returns per unit of risk. BlackRock AAA CLO is currently generating about 0.49 of returns per unit of risk over similar time horizon. If you would invest  5,103  in BlackRock AAA CLO on September 14, 2024 and sell it today you would earn a total of  78.00  from holding BlackRock AAA CLO or generate 1.53% return on investment over 90 days.

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

iShares Ultra Short Term  vs.  BlackRock AAA CLO

iShares Ultra Short

Risk-Adjusted Performance

44 of 100

Excellent

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Ultra Short Term are ranked lower than 44 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, IShares Ultra is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

BlackRock AAA CLO

Risk-Adjusted Performance

38 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in BlackRock AAA CLO are ranked lower than 38 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, BlackRock AAA 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 Ultra and BlackRock AAA

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

The idea behind iShares Ultra Short Term and BlackRock AAA CLO 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.