Correlation Between IShares Treasury and FlexShares Ready

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

Diversification Opportunities for IShares Treasury and FlexShares Ready

0.99

Correlation Coefficient

IShares Treasury  FlexShares Ready

No risk reduction

The 3 months correlation between IShares and FlexShares is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding iShares Treasury Floating and FlexShares Ready Access in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FlexShares Ready Access 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 FlexShares Ready. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FlexShares Ready Access has no effect on the direction of IShares Treasury i.e., IShares Treasury and FlexShares Ready go up and down completely randomly.

Pair Corralation between IShares Treasury and FlexShares Ready

Given the investment horizon of 90 days IShares Treasury is expected to generate 1.58 times less return on investment than FlexShares Ready. In addition to that, IShares Treasury is 1.54 times more volatile than FlexShares Ready Access. It trades about 0.28 of its total potential returns per unit of risk. FlexShares Ready Access is currently generating about 0.67 per unit of volatility. If you would invest  7,460  in FlexShares Ready Access on December 3, 2024 and sell it today you would earn a total of  97.00  from holding FlexShares Ready Access or generate 1.3% 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.  FlexShares Ready Access

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 21 (%) 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.

FlexShares Ready Access

Risk-Adjusted Performance

Excellent

Compared to the overall equity markets, risk-adjusted returns on investments in FlexShares Ready Access are ranked lower than 52 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, FlexShares Ready is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with IShares Treasury and FlexShares Ready

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

The idea behind iShares Treasury Floating and FlexShares Ready Access 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.