Correlation Between IShares Core and Australian High

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

By analyzing existing cross correlation between iShares Core SP and Australian High Interest, you can compare the effects of market volatilities on IShares Core and Australian High 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 Australian High. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and Australian High.

Diversification Opportunities for IShares Core and Australian High

0.93

Correlation Coefficient

IShares Core  Australian High

Almost no diversification

The 3 months correlation between IShares and Australian is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SP and Australian High Interest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian High Interest 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 SP are associated (or correlated) with Australian High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian High Interest has no effect on the direction of IShares Core i.e., IShares Core and Australian High go up and down completely randomly.

Pair Corralation between IShares Core and Australian High

Assuming the 90 days trading horizon iShares Core SP is expected to generate 68.94 times more return on investment than Australian High. However, IShares Core is 68.94 times more volatile than Australian High Interest. It trades about 0.21 of its potential returns per unit of risk. Australian High Interest is currently generating about 0.92 per unit of risk. If you would invest  16,581  in iShares Core SP on September 13, 2024 and sell it today you would earn a total of  2,944  from holding iShares Core SP or generate 17.76% return on investment over 90 days.

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

iShares Core SP  vs.  Australian High Interest

iShares Core SP

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core SP are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, IShares Core unveiled solid returns over the last few months and may actually be approaching a breakup point.

Australian High Interest

Risk-Adjusted Performance

72 of 100

Market Crasher

Compared to the overall equity markets, risk-adjusted returns on investments in Australian High Interest are ranked lower than 72 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Australian High is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with IShares Core and Australian High

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

The idea behind iShares Core SP and Australian High Interest 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.