Correlation Between IShares Core and HCM Defender

Can any of the company-specific risk be diversified away by investing in both IShares Core and HCM Defender 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 HCM Defender 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 HCM Defender 100, you can compare the effects of market volatilities on IShares Core and HCM Defender 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 HCM Defender. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and HCM Defender.

Diversification Opportunities for IShares Core and HCM Defender

0.99

Correlation Coefficient

IShares Core  HCM Defender

No risk reduction

The 3 months correlation between IShares and HCM is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SP and HCM Defender 100 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HCM Defender 100 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 HCM Defender. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HCM Defender 100 has no effect on the direction of IShares Core i.e., IShares Core and HCM Defender go up and down completely randomly.

Pair Corralation between IShares Core and HCM Defender

Given the investment horizon of 90 days IShares Core is expected to generate 1.13 times less return on investment than HCM Defender. But when comparing it to its historical volatility, iShares Core SP is 1.49 times less risky than HCM Defender. It trades about 0.28 of its potential returns per unit of risk. HCM Defender 100 is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  6,249  in HCM Defender 100 on September 2, 2024 and sell it today you would earn a total of  380.00  from holding HCM Defender 100 or generate 6.08% 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.  HCM Defender 100

iShares Core SP

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core SP are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, IShares Core may actually be approaching a critical reversion point that can send shares even higher in January 2025.

HCM Defender 100

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in HCM Defender 100 are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, HCM Defender may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with IShares Core and HCM Defender

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

The idea behind iShares Core SP and HCM Defender 100 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.