Correlation Between IShares 10 and Quadratic Deflation

Can any of the company-specific risk be diversified away by investing in both IShares 10 and Quadratic Deflation 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 10 and Quadratic Deflation into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between iShares 10 20 Year and Quadratic Deflation ETF, you can compare the effects of market volatilities on IShares 10 and Quadratic Deflation 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 10 with a short position of Quadratic Deflation. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares 10 and Quadratic Deflation.

Diversification Opportunities for IShares 10 and Quadratic Deflation

0.52

Correlation Coefficient

IShares 10  Quadratic Deflation

Very weak diversification

The 3 months correlation between IShares and Quadratic is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding iShares 10 20 Year and Quadratic Deflation ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quadratic Deflation ETF and IShares 10 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 10 20 Year are associated (or correlated) with Quadratic Deflation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quadratic Deflation ETF has no effect on the direction of IShares 10 i.e., IShares 10 and Quadratic Deflation go up and down completely randomly.

Pair Corralation between IShares 10 and Quadratic Deflation

Considering the 90-day investment horizon iShares 10 20 Year is expected to generate 0.96 times more return on investment than Quadratic Deflation. However, iShares 10 20 Year is 1.05 times less risky than Quadratic Deflation. It trades about 0.1 of its potential returns per unit of risk. Quadratic Deflation ETF is currently generating about -0.03 per unit of risk. If you would invest  9,927  in iShares 10 20 Year on December 30, 2024 and sell it today you would earn a total of  387.00  from holding iShares 10 20 Year or generate 3.9% return on investment over 90 days.

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

iShares 10 20 Year  vs.  Quadratic Deflation ETF

iShares 10 20

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares 10 20 Year are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong essential indicators, IShares 10 is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Quadratic Deflation ETF

Risk-Adjusted Performance

Very Weak

Over the last 90 days Quadratic Deflation ETF has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Quadratic Deflation is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with IShares 10 and Quadratic Deflation

The main advantage of trading using opposite IShares 10 and Quadratic Deflation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares 10 position performs unexpectedly, Quadratic Deflation 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 Quadratic Deflation will offset losses from the drop in Quadratic Deflation's long position.

The idea behind iShares 10 20 Year and Quadratic Deflation ETF 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.