Correlation Between IShares Short and IShares Ultra

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

Diversification Opportunities for IShares Short and IShares Ultra

1.0
  Correlation Coefficient

No risk reduction

The 3 months correlation between IShares and IShares is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding IShares Short Treasury and IShares Ultra Short-Term in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IShares Ultra Short-Term and IShares Short 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 Short Treasury are associated (or correlated) with IShares Ultra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IShares Ultra Short-Term has no effect on the direction of IShares Short i.e., IShares Short and IShares Ultra go up and down completely randomly.

Pair Corralation between IShares Short and IShares Ultra

Considering the 90-day investment horizon IShares Short is expected to generate 1.1 times less return on investment than IShares Ultra. But when comparing it to its historical volatility, IShares Short Treasury is 18.59 times less risky than IShares Ultra. It trades about 0.95 of its potential returns per unit of risk. IShares Ultra Short Term is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  4,755  in IShares Ultra Short Term on December 29, 2023 and sell it today you would earn a total of  299.60  from holding IShares Ultra Short Term or generate 6.3% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

IShares Short Treasury  vs.  IShares Ultra Short-Term

 Performance 
       Timeline  
IShares Short Treasury 

Risk-Adjusted Performance

79 of 100

 
Low
 
High
Market Crasher
Compared to the overall equity markets, risk-adjusted returns on investments in IShares Short Treasury are ranked lower than 79 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable technical indicators, IShares Short is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.
IShares Ultra Short-Term 

Risk-Adjusted Performance

56 of 100

 
Low
 
High
Market Crasher
Compared to the overall equity markets, risk-adjusted returns on investments in IShares Ultra Short Term are ranked lower than 56 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, IShares Ultra is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

IShares Short and IShares Ultra Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with IShares Short and IShares Ultra

The main advantage of trading using opposite IShares Short and IShares Ultra positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Short position performs unexpectedly, IShares Ultra 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 Ultra will offset losses from the drop in IShares Ultra's long position.
The idea behind IShares Short Treasury and IShares Ultra Short Term 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 Global Correlations module to find global opportunities by holding instruments from different markets.

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