Correlation Between IShares Core and Absolute Core

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

By analyzing existing cross correlation between iShares Core MSCI and Absolute Core Strategy, you can compare the effects of market volatilities on IShares Core and Absolute 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 Absolute Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and Absolute Core.

Diversification Opportunities for IShares Core and Absolute Core

0.05

Correlation Coefficient

IShares Core  Absolute Core

Significant diversification

The 3 months correlation between IShares and Absolute is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core MSCI and Absolute Core Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Absolute Core Strategy 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 MSCI are associated (or correlated) with Absolute Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Absolute Core Strategy has no effect on the direction of IShares Core i.e., IShares Core and Absolute Core go up and down completely randomly.

Pair Corralation between IShares Core and Absolute Core

Given the investment horizon of 90 days iShares Core MSCI is expected to under-perform the Absolute Core. In addition to that, IShares Core is 1.58 times more volatile than Absolute Core Strategy. It trades about 0.0 of its total potential returns per unit of risk. Absolute Core Strategy is currently generating about 0.08 per unit of volatility. If you would invest  3,248  in Absolute Core Strategy on September 3, 2024 and sell it today you would earn a total of  80.00  from holding Absolute Core Strategy or generate 2.46% return on investment over 90 days.

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

iShares Core MSCI  vs.  Absolute Core Strategy

iShares Core MSCI

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Core MSCI has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, IShares Core is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Absolute Core Strategy

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Absolute Core Strategy are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, Absolute Core is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with IShares Core and Absolute Core

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

The idea behind iShares Core MSCI and Absolute Core Strategy 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.