Correlation Between IShares Factors and IShares Nasdaq

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

By analyzing existing cross correlation between iShares Factors Growth and iShares Nasdaq 100 ex, you can compare the effects of market volatilities on IShares Factors and IShares Nasdaq 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 Factors with a short position of IShares Nasdaq. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Factors and IShares Nasdaq.

Diversification Opportunities for IShares Factors and IShares Nasdaq

-0.02

Correlation Coefficient

IShares Factors  IShares Nasdaq

Good diversification

The 3 months correlation between IShares and IShares is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding iShares Factors Growth and iShares Nasdaq 100 ex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Nasdaq 100 and IShares Factors 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 Factors Growth are associated (or correlated) with IShares Nasdaq. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Nasdaq 100 has no effect on the direction of IShares Factors i.e., IShares Factors and IShares Nasdaq go up and down completely randomly.

Pair Corralation between IShares Factors and IShares Nasdaq

Given the investment horizon of 90 days iShares Factors Growth is expected to generate 1.07 times more return on investment than IShares Nasdaq. However, IShares Factors is 1.07 times more volatile than iShares Nasdaq 100 ex. It trades about 0.17 of its potential returns per unit of risk. iShares Nasdaq 100 ex is currently generating about 0.11 per unit of risk. If you would invest  5,175  in iShares Factors Growth on September 14, 2024 and sell it today you would earn a total of  559.00  from holding iShares Factors Growth or generate 10.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	61.02%
Values	Daily Returns

iShares Factors Growth  vs.  iShares Nasdaq 100 ex

iShares Factors Growth

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Factors Growth are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal essential indicators, IShares Factors may actually be approaching a critical reversion point that can send shares even higher in January 2025.

iShares Nasdaq 100

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Nasdaq 100 ex are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, IShares Nasdaq may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with IShares Factors and IShares Nasdaq

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

The idea behind iShares Factors Growth and iShares Nasdaq 100 ex 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .