Correlation Between IShares Convertible and X Square

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

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

Diversification Opportunities for IShares Convertible and X Square

0.92

Correlation Coefficient

IShares Convertible  X Square

Almost no diversification

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

Pair Corralation between IShares Convertible and X Square

Given the investment horizon of 90 days iShares Convertible Bond is expected to generate 0.86 times more return on investment than X Square. However, iShares Convertible Bond is 1.16 times less risky than X Square. It trades about -0.25 of its potential returns per unit of risk. X Square Balanced is currently generating about -0.24 per unit of risk. If you would invest  8,885  in iShares Convertible Bond on September 29, 2024 and sell it today you would lose (302.00) from holding iShares Convertible Bond or give up 3.4% of portfolio value over 90 days.

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

iShares Convertible Bond  vs.  X Square Balanced

iShares Convertible Bond

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Convertible Bond are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, IShares Convertible is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

X Square Balanced

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days X Square Balanced has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental drivers, X Square 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 Convertible and X Square

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

The idea behind iShares Convertible Bond and X Square Balanced 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.