Correlation Between Listed Funds and IShares Morningstar

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

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

Diversification Opportunities for Listed Funds and IShares Morningstar

0.94

Correlation Coefficient

Listed Funds  IShares Morningstar

Almost no diversification

The 3 months correlation between Listed and IShares is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Listed Funds Trust and iShares Morningstar Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Morningstar and Listed Funds 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 Listed Funds Trust are associated (or correlated) with IShares Morningstar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Morningstar has no effect on the direction of Listed Funds i.e., Listed Funds and IShares Morningstar go up and down completely randomly.

Pair Corralation between Listed Funds and IShares Morningstar

Considering the 90-day investment horizon Listed Funds is expected to generate 4.57 times less return on investment than IShares Morningstar. But when comparing it to its historical volatility, Listed Funds Trust is 9.27 times less risky than IShares Morningstar. It trades about 0.27 of its potential returns per unit of risk. iShares Morningstar Growth is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  4,847  in iShares Morningstar Growth on September 25, 2024 and sell it today you would earn a total of  4,513  from holding iShares Morningstar Growth or generate 93.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.19%
Values	Daily Returns

Listed Funds Trust  vs.  iShares Morningstar Growth

Listed Funds Trust

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Listed Funds Trust are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Listed Funds is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

iShares Morningstar

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Morningstar Growth are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile forward-looking signals, IShares Morningstar may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Listed Funds and IShares Morningstar

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

The idea behind Listed Funds Trust and iShares Morningstar Growth 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 .