Correlation Between IShares Trust and IShares IShares

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

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

Diversification Opportunities for IShares Trust and IShares IShares

-0.49

Correlation Coefficient

IShares Trust  IShares IShares

Very good diversification

The 3 months correlation between IShares and IShares is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding iShares Trust and iShares iShares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares iShares and IShares Trust 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 Trust are associated (or correlated) with IShares IShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares iShares has no effect on the direction of IShares Trust i.e., IShares Trust and IShares IShares go up and down completely randomly.

Pair Corralation between IShares Trust and IShares IShares

Assuming the 90 days trading horizon IShares Trust is expected to generate 2.04 times less return on investment than IShares IShares. But when comparing it to its historical volatility, iShares Trust is 1.08 times less risky than IShares IShares. It trades about 0.09 of its potential returns per unit of risk. iShares iShares is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  35,263  in iShares iShares on September 12, 2024 and sell it today you would earn a total of  14,894  from holding iShares iShares or generate 42.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	41.6%
Values	Daily Returns

iShares Trust   vs.  iShares iShares

iShares Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, IShares Trust is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

iShares iShares

Risk-Adjusted Performance

10 of 100

OK

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

Pair Trading with IShares Trust and IShares IShares

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

The idea behind iShares Trust and iShares iShares 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.