Correlation Between IShares Corp and CSIF III

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

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

Diversification Opportunities for IShares Corp and CSIF III

0.66

Correlation Coefficient

IShares Corp  CSIF III

Poor diversification

The 3 months correlation between IShares and CSIF is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding iShares Corp Bond and CSIF III Eq in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSIF III Eq and IShares Corp 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 Corp Bond are associated (or correlated) with CSIF III. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSIF III Eq has no effect on the direction of IShares Corp i.e., IShares Corp and CSIF III go up and down completely randomly.

Pair Corralation between IShares Corp and CSIF III

Assuming the 90 days trading horizon IShares Corp is expected to generate 3.51 times less return on investment than CSIF III. But when comparing it to its historical volatility, iShares Corp Bond is 3.8 times less risky than CSIF III. It trades about 0.11 of its potential returns per unit of risk. CSIF III Eq is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  120,226  in CSIF III Eq on September 26, 2024 and sell it today you would earn a total of  49,205  from holding CSIF III Eq or generate 40.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.2%
Values	Daily Returns

iShares Corp Bond  vs.  CSIF III Eq

iShares Corp Bond

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Corp Bond are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, IShares Corp is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

CSIF III Eq

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CSIF III Eq are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of rather sound technical and fundamental indicators, CSIF III is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with IShares Corp and CSIF III

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

The idea behind iShares Corp Bond and CSIF III Eq 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.

Check out your portfolio center.

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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.