Correlation Between IShares Small and WGRO

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

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

Diversification Opportunities for IShares Small and WGRO

0.72

Correlation Coefficient

IShares Small  WGRO

Poor diversification

The 3 months correlation between IShares and WGRO is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding iShares Small Cap and WGRO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WGRO and IShares Small 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 Small Cap are associated (or correlated) with WGRO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WGRO has no effect on the direction of IShares Small i.e., IShares Small and WGRO go up and down completely randomly.

Pair Corralation between IShares Small and WGRO

If you would invest  3,221  in iShares Small Cap on September 23, 2024 and sell it today you would earn a total of  24.00  from holding iShares Small Cap or generate 0.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	1.54%
Values	Daily Returns

iShares Small Cap  vs.  WGRO

iShares Small Cap

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Small Cap are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, IShares Small is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

WGRO

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WGRO has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, WGRO is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with IShares Small and WGRO

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

The idea behind iShares Small Cap and WGRO 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.