Correlation Between IShares Treasury and IShares Floating

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

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

Diversification Opportunities for IShares Treasury and IShares Floating

1.0

Correlation Coefficient

IShares Treasury  IShares Floating

No risk reduction

The 3 months correlation between IShares and IShares is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding iShares Treasury Floating and iShares Floating Rate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Floating Rate and IShares Treasury 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 Treasury Floating are associated (or correlated) with IShares Floating. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Floating Rate has no effect on the direction of IShares Treasury i.e., IShares Treasury and IShares Floating go up and down completely randomly.

Pair Corralation between IShares Treasury and IShares Floating

Given the investment horizon of 90 days IShares Treasury is expected to generate 1.07 times less return on investment than IShares Floating. But when comparing it to its historical volatility, iShares Treasury Floating is 1.68 times less risky than IShares Floating. It trades about 0.87 of its potential returns per unit of risk. iShares Floating Rate is currently generating about 0.56 of returns per unit of risk over similar time horizon. If you would invest  5,048  in iShares Floating Rate on December 29, 2024 and sell it today you would earn a total of  57.00  from holding iShares Floating Rate or generate 1.13% return on investment over 90 days.

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

iShares Treasury Floating  vs.  iShares Floating Rate

iShares Treasury Floating

Risk-Adjusted Performance

Market Crasher

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Treasury Floating are ranked lower than 69 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy essential indicators, IShares Treasury is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

iShares Floating Rate

Risk-Adjusted Performance

Excellent

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Floating Rate are ranked lower than 43 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, IShares Floating is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with IShares Treasury and IShares Floating

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

The idea behind iShares Treasury Floating and iShares Floating Rate 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..