Correlation Between IShares GSCI and IShares SP

Can any of the company-specific risk be diversified away by investing in both IShares GSCI and IShares SP 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 SP 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 SP GSCI, you can compare the effects of market volatilities on IShares GSCI and IShares SP 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 SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares GSCI and IShares SP.

Diversification Opportunities for IShares GSCI and IShares SP

1.0

Correlation Coefficient

IShares GSCI  IShares SP

No risk reduction

The 3 months correlation between IShares and IShares is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding iShares GSCI Commodity and iShares SP GSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares SP GSCI 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 SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares SP GSCI has no effect on the direction of IShares GSCI i.e., IShares GSCI and IShares SP go up and down completely randomly.

Pair Corralation between IShares GSCI and IShares SP

Given the investment horizon of 90 days IShares GSCI is expected to generate 1.29 times less return on investment than IShares SP. But when comparing it to its historical volatility, iShares GSCI Commodity is 1.15 times less risky than IShares SP. It trades about 0.1 of its potential returns per unit of risk. iShares SP GSCI is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  2,100  in iShares SP GSCI on December 1, 2024 and sell it today you would earn a total of  119.00  from holding iShares SP GSCI or generate 5.67% return on investment over 90 days.

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

iShares GSCI Commodity  vs.  iShares SP GSCI

iShares GSCI Commodity

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares GSCI Commodity are ranked lower than 7 (%) 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 SP GSCI

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares SP GSCI are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, IShares SP is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with IShares GSCI and IShares SP

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

The idea behind iShares GSCI Commodity and iShares SP GSCI 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.