Correlation Between Quadratic Interest and IShares TIPS

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

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

Diversification Opportunities for Quadratic Interest and IShares TIPS

0.82

Correlation Coefficient

Quadratic Interest  IShares TIPS

Very poor diversification

The 3 months correlation between Quadratic and IShares is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Quadratic Interest Rate and iShares TIPS Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares TIPS Bond and Quadratic Interest 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 Quadratic Interest Rate are associated (or correlated) with IShares TIPS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares TIPS Bond has no effect on the direction of Quadratic Interest i.e., Quadratic Interest and IShares TIPS go up and down completely randomly.

Pair Corralation between Quadratic Interest and IShares TIPS

Given the investment horizon of 90 days Quadratic Interest Rate is expected to generate 1.93 times more return on investment than IShares TIPS. However, Quadratic Interest is 1.93 times more volatile than iShares TIPS Bond. It trades about 0.2 of its potential returns per unit of risk. iShares TIPS Bond is currently generating about 0.22 per unit of risk. If you would invest  1,756  in Quadratic Interest Rate on December 29, 2024 and sell it today you would earn a total of  114.00  from holding Quadratic Interest Rate or generate 6.49% return on investment over 90 days.

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

Quadratic Interest Rate  vs.  iShares TIPS Bond

Quadratic Interest Rate

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Quadratic Interest Rate are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Quadratic Interest may actually be approaching a critical reversion point that can send shares even higher in April 2025.

iShares TIPS Bond

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares TIPS Bond are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable forward indicators, IShares TIPS is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Quadratic Interest and IShares TIPS

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

The idea behind Quadratic Interest Rate and iShares TIPS 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.