Correlation Between IShares Real and ALPS Active

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

By analyzing existing cross correlation between iShares Real Estate and ALPS Active REIT, you can compare the effects of market volatilities on IShares Real and ALPS Active 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 Real with a short position of ALPS Active. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Real and ALPS Active.

Diversification Opportunities for IShares Real and ALPS Active

0.88

Correlation Coefficient

IShares Real  ALPS Active

Very poor diversification

The 3 months correlation between IShares and ALPS is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding iShares Real Estate and ALPS Active REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALPS Active REIT and IShares Real 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 Real Estate are associated (or correlated) with ALPS Active. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALPS Active REIT has no effect on the direction of IShares Real i.e., IShares Real and ALPS Active go up and down completely randomly.

Pair Corralation between IShares Real and ALPS Active

Considering the 90-day investment horizon IShares Real is expected to generate 1.5 times less return on investment than ALPS Active. In addition to that, IShares Real is 1.09 times more volatile than ALPS Active REIT. It trades about 0.06 of its total potential returns per unit of risk. ALPS Active REIT is currently generating about 0.11 per unit of volatility. If you would invest  2,810  in ALPS Active REIT on September 2, 2024 and sell it today you would earn a total of  154.00  from holding ALPS Active REIT or generate 5.48% return on investment over 90 days.

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

iShares Real Estate  vs.  ALPS Active REIT

iShares Real Estate

Risk-Adjusted Performance

5 of 100

Modest

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

ALPS Active REIT

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ALPS Active REIT are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable forward indicators, ALPS Active is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with IShares Real and ALPS Active

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

The idea behind iShares Real Estate and ALPS Active REIT 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.