Correlation Between ETRACS Bloomberg and IShares SP

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

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

Diversification Opportunities for ETRACS Bloomberg and IShares SP

0.68

Correlation Coefficient

ETRACS Bloomberg  IShares SP

Poor diversification

The 3 months correlation between ETRACS and IShares is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding ETRACS Bloomberg Commodity and iShares SP GSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares SP GSCI and ETRACS Bloomberg 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 ETRACS Bloomberg Commodity are associated (or correlated) with IShares SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares SP GSCI has no effect on the direction of ETRACS Bloomberg i.e., ETRACS Bloomberg and IShares SP go up and down completely randomly.

Pair Corralation between ETRACS Bloomberg and IShares SP

Given the investment horizon of 90 days ETRACS Bloomberg Commodity is expected to generate 2.5 times more return on investment than IShares SP. However, ETRACS Bloomberg is 2.5 times more volatile than iShares SP GSCI. It trades about 0.07 of its potential returns per unit of risk. iShares SP GSCI is currently generating about 0.06 per unit of risk. If you would invest  1,986  in ETRACS Bloomberg Commodity on September 12, 2024 and sell it today you would earn a total of  208.00  from holding ETRACS Bloomberg Commodity or generate 10.47% return on investment over 90 days.

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

ETRACS Bloomberg Commodity  vs.  iShares SP GSCI

ETRACS Bloomberg Com

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ETRACS Bloomberg Commodity are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady fundamental indicators, ETRACS Bloomberg may actually be approaching a critical reversion point that can send shares even higher in January 2025.

iShares SP GSCI

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares SP GSCI are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, IShares SP is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with ETRACS Bloomberg and IShares SP

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

The idea behind ETRACS Bloomberg Commodity and iShares SP GSCI 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.