Correlation Between IShares VII and IncomeShares META

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

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

Diversification Opportunities for IShares VII and IncomeShares META

0.65

Correlation Coefficient

IShares VII  IncomeShares META

Poor diversification

The 3 months correlation between IShares and IncomeShares is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding iShares VII PLC and IncomeShares META Options in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IncomeShares META Options and IShares VII 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 VII PLC are associated (or correlated) with IncomeShares META. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IncomeShares META Options has no effect on the direction of IShares VII i.e., IShares VII and IncomeShares META go up and down completely randomly.

Pair Corralation between IShares VII and IncomeShares META

Assuming the 90 days trading horizon IShares VII is expected to generate 2.24 times less return on investment than IncomeShares META. But when comparing it to its historical volatility, iShares VII PLC is 1.15 times less risky than IncomeShares META. It trades about 0.05 of its potential returns per unit of risk. IncomeShares META Options is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  944.00  in IncomeShares META Options on September 30, 2024 and sell it today you would earn a total of  30.00  from holding IncomeShares META Options or generate 3.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	7.69%
Values	Daily Returns

iShares VII PLC  vs.  IncomeShares META Options

iShares VII PLC

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares VII PLC are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, IShares VII is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

IncomeShares META Options

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in IncomeShares META Options are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, IncomeShares META may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with IShares VII and IncomeShares META

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

The idea behind iShares VII PLC and IncomeShares META 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.