Correlation Between CoreShares and Coreshares Index

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

By analyzing existing cross correlation between CoreShares SP 500 and Coreshares Index Tracker, you can compare the effects of market volatilities on CoreShares and Coreshares Index 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 CoreShares with a short position of Coreshares Index. Check out your portfolio center. Please also check ongoing floating volatility patterns of CoreShares and Coreshares Index.

Diversification Opportunities for CoreShares and Coreshares Index

0.4

Correlation Coefficient

CoreShares  Coreshares Index

Very weak diversification

The 3 months correlation between CoreShares and Coreshares is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding CoreShares SP 500 and Coreshares Index Tracker in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coreshares Index Tracker and CoreShares 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 CoreShares SP 500 are associated (or correlated) with Coreshares Index. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coreshares Index Tracker has no effect on the direction of CoreShares i.e., CoreShares and Coreshares Index go up and down completely randomly.

Pair Corralation between CoreShares and Coreshares Index

Assuming the 90 days trading horizon CoreShares SP 500 is expected to generate 1.16 times more return on investment than Coreshares Index. However, CoreShares is 1.16 times more volatile than Coreshares Index Tracker. It trades about 0.14 of its potential returns per unit of risk. Coreshares Index Tracker is currently generating about 0.04 per unit of risk. If you would invest  1,006,000  in CoreShares SP 500 on August 30, 2024 and sell it today you would earn a total of  91,800  from holding CoreShares SP 500 or generate 9.13% return on investment over 90 days.

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

CoreShares SP 500  vs.  Coreshares Index Tracker

CoreShares SP 500

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CoreShares SP 500 are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, CoreShares may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Coreshares Index Tracker

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Coreshares Index Tracker are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, Coreshares Index is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with CoreShares and Coreshares Index

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

The idea behind CoreShares SP 500 and Coreshares Index Tracker 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.