Correlation Between IShares Core and STF Tactical

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

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

Diversification Opportunities for IShares Core and STF Tactical

0.62

Correlation Coefficient

IShares Core  STF Tactical

Poor diversification

The 3 months correlation between IShares and STF is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core Growth and STF Tactical Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STF Tactical Growth 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 Growth are associated (or correlated) with STF Tactical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STF Tactical Growth has no effect on the direction of IShares Core i.e., IShares Core and STF Tactical go up and down completely randomly.

Pair Corralation between IShares Core and STF Tactical

Considering the 90-day investment horizon IShares Core is expected to generate 3.36 times less return on investment than STF Tactical. But when comparing it to its historical volatility, iShares Core Growth is 2.23 times less risky than STF Tactical. It trades about 0.32 of its potential returns per unit of risk. STF Tactical Growth is currently generating about 0.48 of returns per unit of risk over similar time horizon. If you would invest  2,341  in STF Tactical Growth on September 16, 2024 and sell it today you would earn a total of  152.00  from holding STF Tactical Growth or generate 6.49% return on investment over 90 days.

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

iShares Core Growth  vs.  STF Tactical Growth

iShares Core Growth

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core Growth are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, IShares Core is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

STF Tactical Growth

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in STF Tactical Growth are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent technical and fundamental indicators, STF Tactical may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with IShares Core and STF Tactical

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

The idea behind iShares Core Growth and STF Tactical 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.