Correlation Between IShares Core and ClearShares OCIO

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

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

Diversification Opportunities for IShares Core and ClearShares OCIO

0.88

Correlation Coefficient

IShares Core  ClearShares OCIO

Very poor diversification

The 3 months correlation between IShares and ClearShares is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core Growth and ClearShares OCIO ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ClearShares OCIO ETF and IShares 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 iShares Core Growth are associated (or correlated) with ClearShares OCIO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ClearShares OCIO ETF has no effect on the direction of IShares Core i.e., IShares Core and ClearShares OCIO go up and down completely randomly.

Pair Corralation between IShares Core and ClearShares OCIO

Considering the 90-day investment horizon IShares Core is expected to generate 1.77 times less return on investment than ClearShares OCIO. But when comparing it to its historical volatility, iShares Core Growth is 1.32 times less risky than ClearShares OCIO. It trades about 0.06 of its potential returns per unit of risk. ClearShares OCIO ETF is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  3,363  in ClearShares OCIO ETF on August 30, 2024 and sell it today you would earn a total of  94.00  from holding ClearShares OCIO ETF or generate 2.8% return on investment over 90 days.

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

iShares Core Growth  vs.  ClearShares OCIO ETF

iShares Core Growth

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core Growth are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, IShares Core is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

ClearShares OCIO ETF

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ClearShares OCIO ETF are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, ClearShares OCIO is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with IShares Core and ClearShares OCIO

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

The idea behind iShares Core Growth and ClearShares OCIO ETF 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.