Correlation Between IShares Core and Principal

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

Diversification Opportunities for IShares Core and Principal

0.75

Correlation Coefficient

IShares Core  Principal

Poor diversification

The 3 months correlation between IShares and Principal is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SP and Principal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Principal 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 Principal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Principal has no effect on the direction of IShares Core i.e., IShares Core and Principal go up and down completely randomly.

Pair Corralation between IShares Core and Principal

If you would invest  11,760  in iShares Core SP on September 19, 2024 and sell it today you would earn a total of  567.00  from holding iShares Core SP or generate 4.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	1.59%
Values	Daily Returns

iShares Core SP  vs.  Principal

iShares Core SP

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core SP are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable forward-looking indicators, IShares Core is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Principal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Principal has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Principal is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with IShares Core and Principal

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

The idea behind iShares Core SP and Principal 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.