Correlation Between IShares Core and AdvisorShares

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

Diversification Opportunities for IShares Core and AdvisorShares

0.81

Correlation Coefficient

IShares Core  AdvisorShares

Very poor diversification

The 3 months correlation between IShares and AdvisorShares is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SP and AdvisorShares Q Dynamic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AdvisorShares Q Dynamic 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 AdvisorShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AdvisorShares Q Dynamic has no effect on the direction of IShares Core i.e., IShares Core and AdvisorShares go up and down completely randomly.

Pair Corralation between IShares Core and AdvisorShares

Given the investment horizon of 90 days iShares Core SP is expected to generate 1.25 times more return on investment than AdvisorShares. However, IShares Core is 1.25 times more volatile than AdvisorShares Q Dynamic. It trades about 0.12 of its potential returns per unit of risk. AdvisorShares Q Dynamic is currently generating about 0.11 per unit of risk. If you would invest  12,810  in iShares Core SP on August 30, 2024 and sell it today you would earn a total of  970.00  from holding iShares Core SP or generate 7.57% return on investment over 90 days.

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

iShares Core SP  vs.  AdvisorShares Q Dynamic

iShares Core SP

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core SP are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, IShares Core may actually be approaching a critical reversion point that can send shares even higher in December 2024.

AdvisorShares Q Dynamic

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AdvisorShares Q Dynamic are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, AdvisorShares is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IShares Core and AdvisorShares

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

The idea behind iShares Core SP and AdvisorShares Q Dynamic 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.