Correlation Between IShares Ultra and AB Ultra

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

Diversification Opportunities for IShares Ultra and AB Ultra

0.9

Correlation Coefficient

IShares Ultra  AB Ultra

Almost no diversification

The 3 months correlation between IShares and YEAR is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding iShares Ultra Short Term and AB Ultra Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AB Ultra Short 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 AB Ultra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AB Ultra Short has no effect on the direction of IShares Ultra i.e., IShares Ultra and AB Ultra go up and down completely randomly.

Pair Corralation between IShares Ultra and AB Ultra

Given the investment horizon of 90 days iShares Ultra Short Term is expected to generate 0.75 times more return on investment than AB Ultra. However, iShares Ultra Short Term is 1.34 times less risky than AB Ultra. It trades about 0.54 of its potential returns per unit of risk. AB Ultra Short is currently generating about 0.24 per unit of risk. If you would invest  5,031  in iShares Ultra Short Term on October 11, 2024 and sell it today you would earn a total of  19.00  from holding iShares Ultra Short Term or generate 0.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.24%
Values	Daily Returns

iShares Ultra Short Term  vs.  AB Ultra Short

iShares Ultra Short

Risk-Adjusted Performance

45 of 100

Excellent

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Ultra Short Term are ranked lower than 45 (%) 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.

AB Ultra Short

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AB Ultra Short are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, AB Ultra is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with IShares Ultra and AB Ultra

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

The idea behind iShares Ultra Short Term and AB Ultra Short 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.