Correlation Between IShares Broad and IShares V

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

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

Diversification Opportunities for IShares Broad and IShares V

0.5

Correlation Coefficient

IShares Broad  IShares V

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 Broad High and iShares V Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares V Public and IShares Broad 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 Broad High are associated (or correlated) with IShares V. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares V Public has no effect on the direction of IShares Broad i.e., IShares Broad and IShares V go up and down completely randomly.

Pair Corralation between IShares Broad and IShares V

Assuming the 90 days trading horizon IShares Broad is expected to generate 4.11 times less return on investment than IShares V. But when comparing it to its historical volatility, iShares Broad High is 5.12 times less risky than IShares V. It trades about 0.13 of its potential returns per unit of risk. iShares V Public is currently generating about 0.1 of returns per unit of risk over similar time horizon. 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 Broad High  vs.  iShares V Public

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.

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.

Pair Trading with IShares Broad and IShares V

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

The idea behind iShares Broad High and iShares V Public 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.