Correlation Between FDO INV and IShares Trust

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

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

Diversification Opportunities for FDO INV and IShares Trust

-0.52

Correlation Coefficient

FDO INV  IShares Trust

Excellent diversification

The 3 months correlation between FDO and IShares is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding FDO INV IMOB and iShares Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Trust and FDO INV 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 FDO INV IMOB are associated (or correlated) with IShares Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Trust has no effect on the direction of FDO INV i.e., FDO INV and IShares Trust go up and down completely randomly.

Pair Corralation between FDO INV and IShares Trust

Assuming the 90 days trading horizon FDO INV IMOB is expected to generate 0.06 times more return on investment than IShares Trust. However, FDO INV IMOB is 16.01 times less risky than IShares Trust. It trades about 0.15 of its potential returns per unit of risk. iShares Trust is currently generating about -0.03 per unit of risk. If you would invest  142,780  in FDO INV IMOB on December 4, 2024 and sell it today you would earn a total of  1,470  from holding FDO INV IMOB or generate 1.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.67%
Values	Daily Returns

FDO INV IMOB  vs.  iShares Trust

FDO INV IMOB

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FDO INV IMOB are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat strong basic indicators, FDO INV is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

iShares Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, IShares Trust is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with FDO INV and IShares Trust

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

The idea behind FDO INV IMOB and iShares 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.