Correlation Between IShares Core and SHP ETF

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

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

Diversification Opportunities for IShares Core and SHP ETF

0.95

Correlation Coefficient

IShares Core  SHP ETF

Almost no diversification

The 3 months correlation between IShares and SHP is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core Aggregate and SHP ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SHP ETF Trust 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 Aggregate are associated (or correlated) with SHP ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SHP ETF Trust has no effect on the direction of IShares Core i.e., IShares Core and SHP ETF go up and down completely randomly.

Pair Corralation between IShares Core and SHP ETF

Considering the 90-day investment horizon IShares Core is expected to generate 1.0 times less return on investment than SHP ETF. In addition to that, IShares Core is 1.04 times more volatile than SHP ETF Trust. It trades about 0.12 of its total potential returns per unit of risk. SHP ETF Trust is currently generating about 0.13 per unit of volatility. If you would invest  4,609  in SHP ETF Trust on December 27, 2024 and sell it today you would earn a total of  105.00  from holding SHP ETF Trust or generate 2.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

iShares Core Aggregate  vs.  SHP ETF Trust

iShares Core Aggregate

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core Aggregate are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, IShares Core is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

SHP ETF Trust

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SHP ETF Trust are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental indicators, SHP ETF is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with IShares Core and SHP ETF

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

The idea behind iShares Core Aggregate and SHP ETF Trust 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.