Correlation Between IShares and IShares Factors

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

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

Diversification Opportunities for IShares and IShares Factors

-0.4

Correlation Coefficient

IShares  IShares Factors

Very good diversification

The 3 months correlation between IShares and IShares is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding IShares and iShares Factors Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Factors Growth and IShares 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 are associated (or correlated) with IShares Factors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Factors Growth has no effect on the direction of IShares i.e., IShares and IShares Factors go up and down completely randomly.

Pair Corralation between IShares and IShares Factors

If you would invest  5,330  in iShares Factors Growth on September 24, 2024 and sell it today you would earn a total of  404.00  from holding iShares Factors Growth or generate 7.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	1.89%
Values	Daily Returns

IShares  vs.  iShares Factors Growth

IShares

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IShares has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, IShares is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

iShares Factors Growth

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days iShares Factors Growth has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly abnormal essential indicators, IShares Factors may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with IShares and IShares Factors

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

The idea behind IShares and iShares Factors Growth 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.