Correlation Between IShares Core and MicroSectors Solactive

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

Diversification Opportunities for IShares Core and MicroSectors Solactive

-0.97

Correlation Coefficient

IShares Core  MicroSectors Solactive

Pay attention - limited upside

The 3 months correlation between IShares and MicroSectors is -0.97. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SP and MicroSectors Solactive FANG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MicroSectors Solactive 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 MicroSectors Solactive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MicroSectors Solactive has no effect on the direction of IShares Core i.e., IShares Core and MicroSectors Solactive go up and down completely randomly.

Pair Corralation between IShares Core and MicroSectors Solactive

Considering the 90-day investment horizon iShares Core SP is expected to generate 0.18 times more return on investment than MicroSectors Solactive. However, iShares Core SP is 5.68 times less risky than MicroSectors Solactive. It trades about 0.2 of its potential returns per unit of risk. MicroSectors Solactive FANG is currently generating about -0.16 per unit of risk. If you would invest  55,311  in iShares Core SP on September 2, 2024 and sell it today you would earn a total of  5,196  from holding iShares Core SP or generate 9.39% return on investment over 90 days.

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

iShares Core SP  vs.  MicroSectors Solactive FANG

iShares Core SP

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core SP are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, IShares Core may actually be approaching a critical reversion point that can send shares even higher in January 2025.

MicroSectors Solactive

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MicroSectors Solactive FANG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Etf's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the ETF investors.

Pair Trading with IShares Core and MicroSectors Solactive

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

The idea behind iShares Core SP and MicroSectors Solactive FANG 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..