Correlation Between IShares SP and IShareso Government

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

By analyzing existing cross correlation between iShares SP 500 and iShareso Government Bond, you can compare the effects of market volatilities on IShares SP and IShareso Government 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 SP with a short position of IShareso Government. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares SP and IShareso Government.

Diversification Opportunities for IShares SP and IShareso Government

0.86

Correlation Coefficient

IShares SP  IShareso Government

Very poor diversification

The 3 months correlation between IShares and IShareso is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding iShares SP 500 and iShareso Government Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShareso Government Bond and IShares SP 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 SP 500 are associated (or correlated) with IShareso Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShareso Government Bond has no effect on the direction of IShares SP i.e., IShares SP and IShareso Government go up and down completely randomly.

Pair Corralation between IShares SP and IShareso Government

Assuming the 90 days trading horizon iShares SP 500 is expected to generate 9.48 times more return on investment than IShareso Government. However, IShares SP is 9.48 times more volatile than iShareso Government Bond. It trades about 0.27 of its potential returns per unit of risk. iShareso Government Bond is currently generating about 0.2 per unit of risk. If you would invest  5,049  in iShares SP 500 on September 13, 2024 and sell it today you would earn a total of  737.00  from holding iShares SP 500 or generate 14.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.46%
Values	Daily Returns

iShares SP 500  vs.  iShareso Government Bond

iShares SP 500

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares SP 500 are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, IShares SP unveiled solid returns over the last few months and may actually be approaching a breakup point.

iShareso Government Bond

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShareso Government Bond are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, IShareso Government is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with IShares SP and IShareso Government

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

The idea behind iShares SP 500 and iShareso Government Bond 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 Transaction History module to view history of all your transactions and understand their impact on performance.