Correlation Between IShares Core and NuShares Enhanced

Can any of the company-specific risk be diversified away by investing in both IShares Core and NuShares Enhanced 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 NuShares Enhanced 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 NuShares Enhanced Yield, you can compare the effects of market volatilities on IShares Core and NuShares Enhanced 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 NuShares Enhanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and NuShares Enhanced.

Diversification Opportunities for IShares Core and NuShares Enhanced

0.99

Correlation Coefficient

IShares Core  NuShares Enhanced

No risk reduction

The 3 months correlation between IShares and NuShares is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core Aggregate and NuShares Enhanced Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NuShares Enhanced Yield 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 NuShares Enhanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NuShares Enhanced Yield has no effect on the direction of IShares Core i.e., IShares Core and NuShares Enhanced go up and down completely randomly.

Pair Corralation between IShares Core and NuShares Enhanced

Considering the 90-day investment horizon iShares Core Aggregate is expected to under-perform the NuShares Enhanced. In addition to that, IShares Core is 1.0 times more volatile than NuShares Enhanced Yield. It trades about -0.09 of its total potential returns per unit of risk. NuShares Enhanced Yield is currently generating about -0.04 per unit of volatility. If you would invest  2,132  in NuShares Enhanced Yield on September 12, 2024 and sell it today you would lose (17.10) from holding NuShares Enhanced Yield or give up 0.8% of portfolio value over 90 days.

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

iShares Core Aggregate  vs.  NuShares Enhanced Yield

iShares Core Aggregate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Core Aggregate has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

NuShares Enhanced Yield

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NuShares Enhanced Yield has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, NuShares Enhanced is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with IShares Core and NuShares Enhanced

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

The idea behind iShares Core Aggregate and NuShares Enhanced Yield 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.