Correlation Between IShares Treasury and IShares Short

Can any of the company-specific risk be diversified away by investing in both IShares Treasury and IShares Short 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 Short 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 Short Maturity, you can compare the effects of market volatilities on IShares Treasury and IShares Short 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 Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Treasury and IShares Short.

Diversification Opportunities for IShares Treasury and IShares Short

0.96

Correlation Coefficient

IShares Treasury  IShares Short

Almost no diversification

The 3 months correlation between IShares and IShares is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding iShares Treasury Floating and iShares Short Maturity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Short Maturity 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 Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Short Maturity has no effect on the direction of IShares Treasury i.e., IShares Treasury and IShares Short go up and down completely randomly.

Pair Corralation between IShares Treasury and IShares Short

Given the investment horizon of 90 days IShares Treasury is expected to generate 1.33 times less return on investment than IShares Short. But when comparing it to its historical volatility, iShares Treasury Floating is 4.73 times less risky than IShares Short. It trades about 0.87 of its potential returns per unit of risk. iShares Short Maturity is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  5,009  in iShares Short Maturity on December 29, 2024 and sell it today you would earn a total of  70.00  from holding iShares Short Maturity or generate 1.4% 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 Short Maturity

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 Short Maturity

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Short Maturity are ranked lower than 19 (%) 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 current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with IShares Treasury and IShares Short

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

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