Correlation Between IShares Short and Ab Tax

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

By analyzing existing cross correlation between iShares Short Term National and Ab Tax Aware Short, you can compare the effects of market volatilities on IShares Short and Ab Tax 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 Ab Tax. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Short and Ab Tax.

Diversification Opportunities for IShares Short and Ab Tax

0.93

Correlation Coefficient

IShares Short  Ab Tax

Almost no diversification

The 3 months correlation between IShares and TAFI is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding iShares Short Term National and Ab Tax Aware Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ab Tax Aware 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 Term National are associated (or correlated) with Ab Tax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ab Tax Aware has no effect on the direction of IShares Short i.e., IShares Short and Ab Tax go up and down completely randomly.

Pair Corralation between IShares Short and Ab Tax

Considering the 90-day investment horizon IShares Short is expected to generate 1.37 times less return on investment than Ab Tax. But when comparing it to its historical volatility, iShares Short Term National is 1.5 times less risky than Ab Tax. It trades about 0.12 of its potential returns per unit of risk. Ab Tax Aware Short is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  2,483  in Ab Tax Aware Short on December 27, 2024 and sell it today you would earn a total of  21.00  from holding Ab Tax Aware Short or generate 0.85% return on investment over 90 days.

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

iShares Short Term National  vs.  Ab Tax Aware Short

iShares Short Term

Risk-Adjusted Performance

OK

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

Ab Tax Aware

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ab Tax Aware Short are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical and fundamental indicators, Ab Tax is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with IShares Short and Ab Tax

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

The idea behind iShares Short Term National and Ab Tax Aware Short 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.