Correlation Between LS 1x and IShares Core

Can any of the company-specific risk be diversified away by investing in both LS 1x and IShares Core 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 LS 1x and IShares Core into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between LS 1x Amazon and iShares Core SP, you can compare the effects of market volatilities on LS 1x and IShares Core 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 LS 1x with a short position of IShares Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of LS 1x and IShares Core.

Diversification Opportunities for LS 1x and IShares Core

0.75

Correlation Coefficient

LS 1x  IShares Core

Poor diversification

The 3 months correlation between 1AMZ and IShares is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding LS 1x Amazon and iShares Core SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core SP and LS 1x 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 LS 1x Amazon are associated (or correlated) with IShares Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Core SP has no effect on the direction of LS 1x i.e., LS 1x and IShares Core go up and down completely randomly.

Pair Corralation between LS 1x and IShares Core

Assuming the 90 days trading horizon LS 1x Amazon is expected to generate 2.68 times more return on investment than IShares Core. However, LS 1x is 2.68 times more volatile than iShares Core SP. It trades about 0.09 of its potential returns per unit of risk. iShares Core SP is currently generating about 0.11 per unit of risk. If you would invest  301.00  in LS 1x Amazon on October 6, 2024 and sell it today you would earn a total of  384.00  from holding LS 1x Amazon or generate 127.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.58%
Values	Daily Returns

LS 1x Amazon  vs.  iShares Core SP

LS 1x Amazon

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in LS 1x Amazon are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, LS 1x unveiled solid returns over the last few months and may actually be approaching a breakup point.

iShares Core SP

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core SP are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, IShares Core 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 LS 1x and IShares Core

The main advantage of trading using opposite LS 1x and IShares Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LS 1x position performs unexpectedly, IShares Core 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 Core will offset losses from the drop in IShares Core's long position.

The idea behind LS 1x Amazon and iShares Core SP 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.