Correlation Between Beta Shares and IShares SP

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

By analyzing existing cross correlation between Beta Shares SPASX and iShares SP 500, you can compare the effects of market volatilities on Beta Shares and IShares SP 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 Beta Shares with a short position of IShares SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beta Shares and IShares SP.

Diversification Opportunities for Beta Shares and IShares SP

0.86

Correlation Coefficient

Beta Shares  IShares SP

Very poor diversification

The 3 months correlation between Beta and IShares is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Beta Shares SPASX and iShares SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares SP 500 and Beta Shares 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 Beta Shares SPASX are associated (or correlated) with IShares SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares SP 500 has no effect on the direction of Beta Shares i.e., Beta Shares and IShares SP go up and down completely randomly.

Pair Corralation between Beta Shares and IShares SP

Assuming the 90 days trading horizon Beta Shares SPASX is expected to under-perform the IShares SP. In addition to that, Beta Shares is 1.39 times more volatile than iShares SP 500. It trades about -0.32 of its total potential returns per unit of risk. iShares SP 500 is currently generating about -0.16 per unit of volatility. If you would invest  5,493  in iShares SP 500 on September 24, 2024 and sell it today you would lose (133.00) from holding iShares SP 500 or give up 2.42% of portfolio value over 90 days.

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

Beta Shares SPASX  vs.  iShares SP 500

Beta Shares SPASX

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Beta Shares SPASX are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Beta Shares is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

iShares SP 500

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares SP 500 are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, IShares SP is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Beta Shares and IShares SP

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

The idea behind Beta Shares SPASX and iShares SP 500 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.

Check out your portfolio center.

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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.