Correlation Between IShares Premium and IShares Equal

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

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

Diversification Opportunities for IShares Premium and IShares Equal

-0.32

Correlation Coefficient

IShares Premium  IShares Equal

Very good diversification

The 3 months correlation between IShares and IShares is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding iShares Premium Money and iShares Equal Weight in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Equal Weight and IShares Premium 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 Premium Money are associated (or correlated) with IShares Equal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Equal Weight has no effect on the direction of IShares Premium i.e., IShares Premium and IShares Equal go up and down completely randomly.

Pair Corralation between IShares Premium and IShares Equal

Assuming the 90 days trading horizon iShares Premium Money is expected to generate 0.03 times more return on investment than IShares Equal. However, iShares Premium Money is 35.5 times less risky than IShares Equal. It trades about 0.81 of its potential returns per unit of risk. iShares Equal Weight is currently generating about 0.0 per unit of risk. If you would invest  4,962  in iShares Premium Money on December 1, 2024 and sell it today you would earn a total of  41.00  from holding iShares Premium Money or generate 0.83% return on investment over 90 days.

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

iShares Premium Money  vs.  iShares Equal Weight

iShares Premium Money

Risk-Adjusted Performance

Market Crasher

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Premium Money are ranked lower than 63 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, IShares Premium is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

iShares Equal Weight

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Equal Weight has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, IShares Equal is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with IShares Premium and IShares Equal

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

The idea behind iShares Premium Money and iShares Equal Weight 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.

Check out your portfolio center.

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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.