Correlation Between IShares Trust and BlackRock AAA

Can any of the company-specific risk be diversified away by investing in both IShares Trust 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 Trust 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 Trust and BlackRock AAA CLO, you can compare the effects of market volatilities on IShares Trust 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 Trust with a short position of BlackRock AAA. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Trust and BlackRock AAA.

Diversification Opportunities for IShares Trust and BlackRock AAA

0.69

Correlation Coefficient

IShares Trust  BlackRock AAA

Poor diversification

The 3 months correlation between IShares and BlackRock is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding iShares Trust 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 Trust 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 Trust 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 Trust i.e., IShares Trust and BlackRock AAA go up and down completely randomly.

Pair Corralation between IShares Trust and BlackRock AAA

Given the investment horizon of 90 days iShares Trust is expected to generate 9.9 times more return on investment than BlackRock AAA. However, IShares Trust is 9.9 times more volatile than BlackRock AAA CLO. It trades about 0.09 of its potential returns per unit of risk. BlackRock AAA CLO is currently generating about 0.49 per unit of risk. If you would invest  3,098  in iShares Trust on September 14, 2024 and sell it today you would earn a total of  82.00  from holding iShares Trust or generate 2.65% return on investment over 90 days.

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

iShares Trust  vs.  BlackRock AAA CLO

iShares Trust

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Trust are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, IShares Trust is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

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 Trust and BlackRock AAA

The main advantage of trading using opposite IShares Trust and BlackRock AAA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Trust 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 Trust 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.