Correlation Between IShares SP and ETRACS Bloomberg

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

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

Diversification Opportunities for IShares SP and ETRACS Bloomberg

0.68

Correlation Coefficient

IShares SP  ETRACS Bloomberg

Poor diversification

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

Pair Corralation between IShares SP and ETRACS Bloomberg

Considering the 90-day investment horizon IShares SP is expected to generate 1.26 times less return on investment than ETRACS Bloomberg. But when comparing it to its historical volatility, iShares SP GSCI is 2.19 times less risky than ETRACS Bloomberg. It trades about 0.05 of its potential returns per unit of risk. ETRACS Bloomberg Commodity is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,972  in ETRACS Bloomberg Commodity on September 4, 2024 and sell it today you would earn a total of  52.00  from holding ETRACS Bloomberg Commodity or generate 2.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

iShares SP GSCI  vs.  ETRACS Bloomberg Commodity

iShares SP GSCI

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares SP GSCI are ranked lower than 3 (%) 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.

ETRACS Bloomberg Com

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ETRACS Bloomberg Commodity are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, ETRACS Bloomberg is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IShares SP and ETRACS Bloomberg

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

The idea behind iShares SP GSCI and ETRACS Bloomberg Commodity 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.