Correlation Between IShares 10 and IShares 1

Can any of the company-specific risk be diversified away by investing in both IShares 10 and IShares 1 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 IShares 1 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 iShares 1 3 Year, you can compare the effects of market volatilities on IShares 10 and IShares 1 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 IShares 1. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares 10 and IShares 1.

Diversification Opportunities for IShares 10 and IShares 1

0.74

Correlation Coefficient

IShares 10  IShares 1

Poor diversification

The 3 months correlation between IShares and IShares is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding iShares 10 20 Year and iShares 1 3 Year in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares 1 3 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 IShares 1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares 1 3 has no effect on the direction of IShares 10 i.e., IShares 10 and IShares 1 go up and down completely randomly.

Pair Corralation between IShares 10 and IShares 1

Considering the 90-day investment horizon iShares 10 20 Year is expected to under-perform the IShares 1. In addition to that, IShares 10 is 8.41 times more volatile than iShares 1 3 Year. It trades about -0.29 of its total potential returns per unit of risk. iShares 1 3 Year is currently generating about 0.13 per unit of volatility. If you would invest  8,163  in iShares 1 3 Year on September 25, 2024 and sell it today you would earn a total of  15.00  from holding iShares 1 3 Year or generate 0.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

iShares 10 20 Year  vs.  iShares 1 3 Year

iShares 10 20

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares 10 20 Year has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Etf's essential indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the Etf traders.

iShares 1 3

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares 1 3 Year has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical indicators, IShares 1 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IShares 10 and IShares 1

The main advantage of trading using opposite IShares 10 and IShares 1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares 10 position performs unexpectedly, IShares 1 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 1 will offset losses from the drop in IShares 1's long position.

The idea behind iShares 10 20 Year and iShares 1 3 Year 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.