Correlation Between IShares Convertible and IShares Flexible

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

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

Diversification Opportunities for IShares Convertible and IShares Flexible

0.79

Correlation Coefficient

IShares Convertible  IShares Flexible

Poor diversification

The 3 months correlation between IShares and IShares is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding iShares Convertible Bond and iShares Flexible Monthly in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Flexible Monthly and IShares Convertible 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 Convertible Bond are associated (or correlated) with IShares Flexible. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Flexible Monthly has no effect on the direction of IShares Convertible i.e., IShares Convertible and IShares Flexible go up and down completely randomly.

Pair Corralation between IShares Convertible and IShares Flexible

Assuming the 90 days trading horizon iShares Convertible Bond is expected to generate 1.7 times more return on investment than IShares Flexible. However, IShares Convertible is 1.7 times more volatile than iShares Flexible Monthly. It trades about 0.19 of its potential returns per unit of risk. iShares Flexible Monthly is currently generating about 0.16 per unit of risk. If you would invest  1,703  in iShares Convertible Bond on April 20, 2025 and sell it today you would earn a total of  85.00  from holding iShares Convertible Bond or generate 4.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

iShares Convertible Bond  vs.  iShares Flexible Monthly

iShares Convertible Bond

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Convertible Bond are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, IShares Convertible is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

iShares Flexible Monthly

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Flexible Monthly are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, IShares Flexible is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with IShares Convertible and IShares Flexible

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

The idea behind iShares Convertible Bond and iShares Flexible Monthly 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.