Correlation Between IShares Core and IncomeShares Amazon

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

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

Diversification Opportunities for IShares Core and IncomeShares Amazon

-0.38

Correlation Coefficient

IShares Core  IncomeShares Amazon

Very good diversification

The 3 months correlation between IShares and IncomeShares is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SP and IncomeShares Amazon Options in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IncomeShares Amazon 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 SP are associated (or correlated) with IncomeShares Amazon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IncomeShares Amazon has no effect on the direction of IShares Core i.e., IShares Core and IncomeShares Amazon go up and down completely randomly.

Pair Corralation between IShares Core and IncomeShares Amazon

Assuming the 90 days trading horizon IShares Core is expected to generate 5.97 times less return on investment than IncomeShares Amazon. But when comparing it to its historical volatility, iShares Core SP is 1.53 times less risky than IncomeShares Amazon. It trades about 0.11 of its potential returns per unit of risk. IncomeShares Amazon Options is currently generating about 0.41 of returns per unit of risk over similar time horizon. If you would invest  1,002  in IncomeShares Amazon Options on September 28, 2024 and sell it today you would earn a total of  67.00  from holding IncomeShares Amazon Options or generate 6.69% return on investment over 90 days.

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

iShares Core SP  vs.  IncomeShares Amazon Options

iShares Core SP

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core SP are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, IShares Core may actually be approaching a critical reversion point that can send shares even higher in January 2025.

IncomeShares Amazon

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in IncomeShares Amazon Options are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, IncomeShares Amazon exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares Core and IncomeShares Amazon

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

The idea behind iShares Core SP and IncomeShares Amazon Options 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.