Correlation Between Discipline Fund and IShares Core

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

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

Diversification Opportunities for Discipline Fund and IShares Core

-0.09

Correlation Coefficient

Discipline Fund  IShares Core

Good diversification

The 3 months correlation between Discipline and IShares is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Discipline Fund ETF and iShares Core Aggressive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core Aggressive and Discipline Fund 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 Discipline Fund ETF are associated (or correlated) with IShares Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Core Aggressive has no effect on the direction of Discipline Fund i.e., Discipline Fund and IShares Core go up and down completely randomly.

Pair Corralation between Discipline Fund and IShares Core

Given the investment horizon of 90 days Discipline Fund ETF is expected to under-perform the IShares Core. But the etf apears to be less risky and, when comparing its historical volatility, Discipline Fund ETF is 1.51 times less risky than IShares Core. The etf trades about 0.0 of its potential returns per unit of risk. The iShares Core Aggressive is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  7,588  in iShares Core Aggressive on September 3, 2024 and sell it today you would earn a total of  360.00  from holding iShares Core Aggressive or generate 4.74% return on investment over 90 days.

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

Discipline Fund ETF  vs.  iShares Core Aggressive

Discipline Fund ETF

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Discipline Fund ETF has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Discipline Fund is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

iShares Core Aggressive

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core Aggressive are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, IShares Core is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Discipline Fund and IShares Core

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

The idea behind Discipline Fund ETF and iShares Core Aggressive 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.