Correlation Between IShares Core and AlphaMark Actively

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

Diversification Opportunities for IShares Core and AlphaMark Actively

0.99

Correlation Coefficient

IShares Core  AlphaMark Actively

No risk reduction

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

Pair Corralation between IShares Core and AlphaMark Actively

Considering the 90-day investment horizon IShares Core is expected to generate 1.02 times less return on investment than AlphaMark Actively. But when comparing it to its historical volatility, iShares Core SP is 1.03 times less risky than AlphaMark Actively. It trades about 0.15 of its potential returns per unit of risk. AlphaMark Actively Managed is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  3,139  in AlphaMark Actively Managed on September 3, 2024 and sell it today you would earn a total of  401.00  from holding AlphaMark Actively Managed or generate 12.77% 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.  AlphaMark Actively Managed

iShares Core SP

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core SP are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent forward-looking indicators, IShares Core may actually be approaching a critical reversion point that can send shares even higher in January 2025.

AlphaMark Actively

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AlphaMark Actively Managed are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating fundamental indicators, AlphaMark Actively may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with IShares Core and AlphaMark Actively

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

The idea behind iShares Core SP and AlphaMark Actively Managed 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.