Correlation Between IShares GSCI and IShares Commodity

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

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

Diversification Opportunities for IShares GSCI and IShares Commodity

0.89

Correlation Coefficient

IShares GSCI  IShares Commodity

Very poor diversification

The 3 months correlation between IShares and IShares is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding iShares GSCI Commodity and iShares Commodity Curve in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Commodity Curve and IShares GSCI 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 GSCI Commodity are associated (or correlated) with IShares Commodity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Commodity Curve has no effect on the direction of IShares GSCI i.e., IShares GSCI and IShares Commodity go up and down completely randomly.

Pair Corralation between IShares GSCI and IShares Commodity

Given the investment horizon of 90 days iShares GSCI Commodity is expected to generate 1.23 times more return on investment than IShares Commodity. However, IShares GSCI is 1.23 times more volatile than iShares Commodity Curve. It trades about 0.09 of its potential returns per unit of risk. iShares Commodity Curve is currently generating about 0.03 per unit of risk. If you would invest  2,514  in iShares GSCI Commodity on December 29, 2024 and sell it today you would earn a total of  96.00  from holding iShares GSCI Commodity or generate 3.82% return on investment over 90 days.

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

iShares GSCI Commodity  vs.  iShares Commodity Curve

iShares GSCI Commodity

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares GSCI Commodity are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable primary indicators, IShares GSCI is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

iShares Commodity Curve

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Commodity Curve are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, IShares Commodity is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with IShares GSCI and IShares Commodity

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

The idea behind iShares GSCI Commodity and iShares Commodity Curve 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.