Correlation Between Global Real and IShares GovernmentCredit

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Can any of the company-specific risk be diversified away by investing in both Global Real and IShares GovernmentCredit 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 Global Real and IShares GovernmentCredit into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global Real Estate and IShares GovernmentCredit Bond, you can compare the effects of market volatilities on Global Real and IShares GovernmentCredit 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 Global Real with a short position of IShares GovernmentCredit. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Real and IShares GovernmentCredit.

Diversification Opportunities for Global Real and IShares GovernmentCredit

0.67
  Correlation Coefficient

Poor diversification

The 3 months correlation between Global and IShares is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding GLOBAL REAL ESTATE and IShares GovernmentCredit Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IShares GovernmentCredit and Global Real 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 Global Real Estate are associated (or correlated) with IShares GovernmentCredit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IShares GovernmentCredit has no effect on the direction of Global Real i.e., Global Real and IShares GovernmentCredit go up and down completely randomly.

Pair Corralation between Global Real and IShares GovernmentCredit

Assuming the 90 days horizon Global Real Estate is expected to under-perform the IShares GovernmentCredit. In addition to that, Global Real is 2.63 times more volatile than IShares GovernmentCredit Bond. It trades about -0.02 of its total potential returns per unit of risk. IShares GovernmentCredit Bond is currently generating about -0.04 per unit of volatility. If you would invest  11,370  in IShares GovernmentCredit Bond on December 3, 2023 and sell it today you would lose (1,044) from holding IShares GovernmentCredit Bond or give up 9.18% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy99.8%
ValuesDaily Returns

GLOBAL REAL ESTATE  vs.  IShares GovernmentCredit Bond

 Performance 
       Timeline  
Global Real Estate 

Risk-Adjusted Performance

3 of 100

 
Low
 
High
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Global Real Estate are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Global Real is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
IShares GovernmentCredit 

Risk-Adjusted Performance

2 of 100

 
Low
 
High
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in IShares GovernmentCredit Bond are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental drivers, IShares GovernmentCredit is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Global Real and IShares GovernmentCredit Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Global Real and IShares GovernmentCredit

The main advantage of trading using opposite Global Real and IShares GovernmentCredit positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Real position performs unexpectedly, IShares GovernmentCredit 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 GovernmentCredit will offset losses from the drop in IShares GovernmentCredit's long position.
The idea behind Global Real Estate and IShares GovernmentCredit Bond 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.
Check out your portfolio center.
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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