Correlation Between IShares Core and Beta Shares

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

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

Diversification Opportunities for IShares Core and Beta Shares

0.81

Correlation Coefficient

IShares Core  Beta Shares

Very poor diversification

The 3 months correlation between IShares and Beta is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core MSCI and Beta Shares SPASX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beta Shares SPASX and IShares Core 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 Core MSCI are associated (or correlated) with Beta Shares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beta Shares SPASX has no effect on the direction of IShares Core i.e., IShares Core and Beta Shares go up and down completely randomly.

Pair Corralation between IShares Core and Beta Shares

Assuming the 90 days trading horizon IShares Core is expected to generate 2.34 times less return on investment than Beta Shares. But when comparing it to its historical volatility, iShares Core MSCI is 1.07 times less risky than Beta Shares. It trades about 0.05 of its potential returns per unit of risk. Beta Shares SPASX is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,422  in Beta Shares SPASX on September 30, 2024 and sell it today you would earn a total of  233.00  from holding Beta Shares SPASX or generate 16.39% return on investment over 90 days.

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

iShares Core MSCI  vs.  Beta Shares SPASX

iShares Core MSCI

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core MSCI are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, IShares Core is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Beta Shares SPASX

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Beta Shares SPASX are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Beta Shares may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with IShares Core and Beta Shares

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

The idea behind iShares Core MSCI and Beta Shares SPASX 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.