Correlation Between IShares Core and Investment Managers

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

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

Diversification Opportunities for IShares Core and Investment Managers

0.61

Correlation Coefficient

IShares Core  Investment Managers

Poor diversification

The 3 months correlation between IShares and Investment is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core Aggressive and Investment Managers Series in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investment Managers 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 Aggressive are associated (or correlated) with Investment Managers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investment Managers has no effect on the direction of IShares Core i.e., IShares Core and Investment Managers go up and down completely randomly.

Pair Corralation between IShares Core and Investment Managers

Considering the 90-day investment horizon iShares Core Aggressive is expected to generate 0.62 times more return on investment than Investment Managers. However, iShares Core Aggressive is 1.62 times less risky than Investment Managers. It trades about 0.1 of its potential returns per unit of risk. Investment Managers Series is currently generating about -0.01 per unit of risk. If you would invest  7,712  in iShares Core Aggressive on November 19, 2024 and sell it today you would earn a total of  267.00  from holding iShares Core Aggressive or generate 3.46% return on investment over 90 days.

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

iShares Core Aggressive  vs.  Investment Managers Series

iShares Core Aggressive

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core Aggressive are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, IShares Core is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Investment Managers

Risk-Adjusted Performance

Very Weak

Over the last 90 days Investment Managers Series has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Investment Managers 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 Investment Managers

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

The idea behind iShares Core Aggressive and Investment Managers Series 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.