Correlation Between IShares Floating and IShares Global

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

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

Diversification Opportunities for IShares Floating and IShares Global

-0.74

Correlation Coefficient

IShares Floating  IShares Global

Pay attention - limited upside

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 Floating Rate and iShares Global Infrastructure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Global Infra and IShares Floating 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 Floating Rate are associated (or correlated) with IShares Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Global Infra has no effect on the direction of IShares Floating i.e., IShares Floating and IShares Global go up and down completely randomly.

Pair Corralation between IShares Floating and IShares Global

Assuming the 90 days trading horizon iShares Floating Rate is expected to generate 0.05 times more return on investment than IShares Global. However, iShares Floating Rate is 19.75 times less risky than IShares Global. It trades about 0.26 of its potential returns per unit of risk. iShares Global Infrastructure is currently generating about -0.03 per unit of risk. If you would invest  1,984  in iShares Floating Rate on December 30, 2024 and sell it today you would earn a total of  17.00  from holding iShares Floating Rate or generate 0.86% return on investment over 90 days.

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

iShares Floating Rate  vs.  iShares Global Infrastructure

iShares Floating Rate

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Floating Rate are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, IShares Floating is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

iShares Global Infra

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Global Infrastructure has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, IShares Global is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with IShares Floating and IShares Global

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

The idea behind iShares Floating Rate and iShares Global Infrastructure 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 Anywhere module to track or share privately all of your investments from the convenience of any device.