Correlation Between IShares GovernmentCredit and Jpmorgan Government

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

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

Diversification Opportunities for IShares GovernmentCredit and Jpmorgan Government

0.99

Correlation Coefficient

IShares GovernmentCredit  Jpmorgan Government

No risk reduction

The 3 months correlation between IShares and Jpmorgan is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding iShares GovernmentCredit Bond and Jpmorgan Government Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jpmorgan Government Bond and IShares GovernmentCredit 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 GovernmentCredit Bond are associated (or correlated) with Jpmorgan Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jpmorgan Government Bond has no effect on the direction of IShares GovernmentCredit i.e., IShares GovernmentCredit and Jpmorgan Government go up and down completely randomly.

Pair Corralation between IShares GovernmentCredit and Jpmorgan Government

Considering the 90-day investment horizon iShares GovernmentCredit Bond is expected to generate 0.95 times more return on investment than Jpmorgan Government. However, iShares GovernmentCredit Bond is 1.05 times less risky than Jpmorgan Government. It trades about -0.21 of its potential returns per unit of risk. Jpmorgan Government Bond is currently generating about -0.21 per unit of risk. If you would invest  10,289  in iShares GovernmentCredit Bond on January 25, 2024 and sell it today you would lose (165.00) from holding iShares GovernmentCredit Bond or give up 1.6% of portfolio value over 90 days.

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

iShares GovernmentCredit Bond  vs.  Jpmorgan Government Bond

IShares GovernmentCredit

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares GovernmentCredit Bond has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental drivers, IShares GovernmentCredit is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Jpmorgan Government Bond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jpmorgan Government Bond has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Jpmorgan Government 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 GovernmentCredit and Jpmorgan Government

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

The idea behind iShares GovernmentCredit Bond and Jpmorgan Government 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.