Correlation Between IShares V and IShares Broad

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

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

Diversification Opportunities for IShares V and IShares Broad

0.5

Correlation Coefficient

IShares V  IShares Broad

Very weak diversification

The 3 months correlation between IShares and IShares is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding iShares V Public and iShares Broad High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Broad High and IShares V 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 V Public are associated (or correlated) with IShares Broad. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Broad High has no effect on the direction of IShares V i.e., IShares V and IShares Broad go up and down completely randomly.

Pair Corralation between IShares V and IShares Broad

Assuming the 90 days trading horizon iShares V Public is expected to generate 5.12 times more return on investment than IShares Broad. However, IShares V is 5.12 times more volatile than iShares Broad High. It trades about 0.1 of its potential returns per unit of risk. iShares Broad High is currently generating about 0.13 per unit of risk. If you would invest  831.00  in iShares V Public on September 12, 2024 and sell it today you would earn a total of  58.00  from holding iShares V Public or generate 6.98% return on investment over 90 days.

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

iShares V Public  vs.  iShares Broad High

iShares V Public

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares V Public are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, IShares V may actually be approaching a critical reversion point that can send shares even higher in January 2025.

iShares Broad High

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Broad High are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, IShares Broad is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with IShares V and IShares Broad

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

The idea behind iShares V Public and iShares Broad High 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.