Correlation Between IShares Core and Kovitz Core

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

Diversification Opportunities for IShares Core and Kovitz Core

0.8

Correlation Coefficient

IShares Core  Kovitz Core

Very poor diversification

The 3 months correlation between IShares and Kovitz is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SP and Kovitz Core Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kovitz Core Equity 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 Kovitz Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kovitz Core Equity has no effect on the direction of IShares Core i.e., IShares Core and Kovitz Core go up and down completely randomly.

Pair Corralation between IShares Core and Kovitz Core

Considering the 90-day investment horizon IShares Core is expected to generate 1.1 times less return on investment than Kovitz Core. In addition to that, IShares Core is 1.03 times more volatile than Kovitz Core Equity. It trades about 0.14 of its total potential returns per unit of risk. Kovitz Core Equity is currently generating about 0.15 per unit of volatility. If you would invest  2,269  in Kovitz Core Equity on August 30, 2024 and sell it today you would earn a total of  166.00  from holding Kovitz Core Equity or generate 7.32% 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.  Kovitz Core Equity

iShares Core SP

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core SP are ranked lower than 10 (%) 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 December 2024.

Kovitz Core Equity

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kovitz Core Equity are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Kovitz Core may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with IShares Core and Kovitz Core

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

The idea behind iShares Core SP and Kovitz Core Equity 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.