Correlation Between Vident Core and IShares Yield

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

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

Diversification Opportunities for Vident Core and IShares Yield

0.89

Correlation Coefficient

Vident Core  IShares Yield

Very poor diversification

The 3 months correlation between Vident and IShares is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Vident Core Bond and iShares Yield Optimized in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Yield Optimized and Vident Core 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 Vident Core Bond are associated (or correlated) with IShares Yield. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Yield Optimized has no effect on the direction of Vident Core i.e., Vident Core and IShares Yield go up and down completely randomly.

Pair Corralation between Vident Core and IShares Yield

Given the investment horizon of 90 days Vident Core Bond is expected to under-perform the IShares Yield. In addition to that, Vident Core is 1.03 times more volatile than iShares Yield Optimized. It trades about -0.08 of its total potential returns per unit of risk. iShares Yield Optimized is currently generating about 0.0 per unit of volatility. If you would invest  2,209  in iShares Yield Optimized on February 4, 2024 and sell it today you would earn a total of  0.00  from holding iShares Yield Optimized or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.65%
Values	Daily Returns

Vident Core Bond  vs.  iShares Yield Optimized

Vident Core Bond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vident Core Bond has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Vident Core is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

iShares Yield Optimized

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Yield Optimized are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, IShares Yield is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Vident Core and IShares Yield

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

The idea behind Vident Core Bond and iShares Yield Optimized 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.