Correlation Between IShares Short and VCRM

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

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

Diversification Opportunities for IShares Short and VCRM

0.52

Correlation Coefficient

IShares Short  VCRM

Very weak diversification

The 3 months correlation between IShares and VCRM is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding iShares Short Maturity and VCRM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VCRM and IShares Short 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 Short Maturity are associated (or correlated) with VCRM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VCRM has no effect on the direction of IShares Short i.e., IShares Short and VCRM go up and down completely randomly.

Pair Corralation between IShares Short and VCRM

Given the investment horizon of 90 days iShares Short Maturity is expected to generate 0.21 times more return on investment than VCRM. However, iShares Short Maturity is 4.76 times less risky than VCRM. It trades about 0.2 of its potential returns per unit of risk. VCRM is currently generating about -0.06 per unit of risk. If you would invest  4,994  in iShares Short Maturity on October 22, 2024 and sell it today you would earn a total of  10.00  from holding iShares Short Maturity or generate 0.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	94.74%
Values	Daily Returns

iShares Short Maturity  vs.  VCRM

iShares Short Maturity

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Short Maturity are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, IShares Short is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

VCRM

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VCRM has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, VCRM is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with IShares Short and VCRM

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

The idea behind iShares Short Maturity and VCRM 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.