Correlation Between Global Real and IShares GovernmentCredit
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
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Global and IShares is 0.91. 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 generate 2.7 times more return on investment than IShares GovernmentCredit. However, Global Real is 2.7 times more volatile than iShares GovernmentCredit Bond. It trades about 0.21 of its potential returns per unit of risk. iShares GovernmentCredit Bond is currently generating about 0.16 per unit of risk. If you would invest 1,255 in Global Real Estate on July 8, 2024 and sell it today you would earn a total of 143.00 from holding Global Real Estate or generate 11.39% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Global Real Estate vs. iShares GovernmentCredit Bond
Performance |
Timeline |
Global Real Estate |
IShares GovernmentCredit |
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.Global Real vs. Mid Cap Value | Global Real vs. Equity Growth Fund | Global Real vs. Income Growth Fund | Global Real vs. Diversified Bond Fund |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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