Correlation Between IShares BBB and Angel Oak

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

By analyzing existing cross correlation between iShares BBB Rated and Angel Oak High, you can compare the effects of market volatilities on IShares BBB and Angel Oak 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 BBB with a short position of Angel Oak. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares BBB and Angel Oak.

Diversification Opportunities for IShares BBB and Angel Oak

0.71

Correlation Coefficient

IShares BBB  Angel Oak

Poor diversification

The 3 months correlation between IShares and Angel is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding iShares BBB Rated and Angel Oak High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Angel Oak High and IShares BBB 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 BBB Rated are associated (or correlated) with Angel Oak. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Angel Oak High has no effect on the direction of IShares BBB i.e., IShares BBB and Angel Oak go up and down completely randomly.

Pair Corralation between IShares BBB and Angel Oak

Given the investment horizon of 90 days iShares BBB Rated is expected to generate 1.56 times more return on investment than Angel Oak. However, IShares BBB is 1.56 times more volatile than Angel Oak High. It trades about 0.12 of its potential returns per unit of risk. Angel Oak High is currently generating about 0.17 per unit of risk. If you would invest  8,413  in iShares BBB Rated on December 19, 2024 and sell it today you would earn a total of  176.00  from holding iShares BBB Rated or generate 2.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

iShares BBB Rated  vs.  Angel Oak High

iShares BBB Rated

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares BBB Rated are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, IShares BBB is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Angel Oak High

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Angel Oak High are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical indicators, Angel Oak is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IShares BBB and Angel Oak

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

The idea behind iShares BBB Rated and Angel Oak High 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.