Correlation Between BetaShares Australian and IShares Core

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

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

Diversification Opportunities for BetaShares Australian and IShares Core

0.35

Correlation Coefficient

BetaShares Australian  IShares Core

Weak diversification

The 3 months correlation between BetaShares and IShares is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding BetaShares Australian Governme and iShares Core MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core MSCI and BetaShares Australian 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 BetaShares Australian Government 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 MSCI has no effect on the direction of BetaShares Australian i.e., BetaShares Australian and IShares Core go up and down completely randomly.

Pair Corralation between BetaShares Australian and IShares Core

Assuming the 90 days trading horizon BetaShares Australian Government is expected to generate 0.45 times more return on investment than IShares Core. However, BetaShares Australian Government is 2.21 times less risky than IShares Core. It trades about 0.07 of its potential returns per unit of risk. iShares Core MSCI is currently generating about -0.05 per unit of risk. If you would invest  4,124  in BetaShares Australian Government on December 2, 2024 and sell it today you would earn a total of  67.00  from holding BetaShares Australian Government or generate 1.62% return on investment over 90 days.

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

BetaShares Australian Governme  vs.  iShares Core MSCI

BetaShares Australian

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BetaShares Australian Government are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, BetaShares Australian is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

iShares Core MSCI

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Core MSCI has generated negative risk-adjusted returns adding no value to investors with long positions. 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 BetaShares Australian and IShares Core

The main advantage of trading using opposite BetaShares Australian and IShares Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BetaShares Australian 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 BetaShares Australian Government and iShares Core MSCI 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.