Correlation Between IShares Core and IShares CoreSP

Can any of the company-specific risk be diversified away by investing in both IShares Core and IShares CoreSP 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 IShares CoreSP 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 iShares CoreSP MidCap, you can compare the effects of market volatilities on IShares Core and IShares CoreSP 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 IShares CoreSP. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and IShares CoreSP.

Diversification Opportunities for IShares Core and IShares CoreSP

0.99

Correlation Coefficient

IShares Core  IShares CoreSP

No risk reduction

The 3 months correlation between IShares and IShares is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SP and iShares CoreSP MidCap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares CoreSP MidCap 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 IShares CoreSP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares CoreSP MidCap has no effect on the direction of IShares Core i.e., IShares Core and IShares CoreSP go up and down completely randomly.

Pair Corralation between IShares Core and IShares CoreSP

Assuming the 90 days trading horizon iShares Core SP is expected to under-perform the IShares CoreSP. In addition to that, IShares Core is 1.22 times more volatile than iShares CoreSP MidCap. It trades about -0.18 of its total potential returns per unit of risk. iShares CoreSP MidCap is currently generating about -0.17 per unit of volatility. If you would invest  5,170  in iShares CoreSP MidCap on September 25, 2024 and sell it today you would lose (141.00) from holding iShares CoreSP MidCap or give up 2.73% of portfolio value over 90 days.

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

iShares Core SP  vs.  iShares CoreSP MidCap

iShares Core SP

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core SP are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, IShares Core may actually be approaching a critical reversion point that can send shares even higher in January 2025.

iShares CoreSP MidCap

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares CoreSP MidCap are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical indicators, IShares CoreSP may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with IShares Core and IShares CoreSP

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

The idea behind iShares Core SP and iShares CoreSP MidCap 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.