Correlation Between IShares NASDAQ and IShares Corp

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

By analyzing existing cross correlation between iShares NASDAQ 100 and iShares Corp Bond, you can compare the effects of market volatilities on IShares NASDAQ and IShares Corp 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 NASDAQ with a short position of IShares Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares NASDAQ and IShares Corp.

Diversification Opportunities for IShares NASDAQ and IShares Corp

0.66

Correlation Coefficient

IShares NASDAQ  IShares Corp

Poor diversification

The 3 months correlation between IShares and IShares is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding iShares NASDAQ 100 and iShares Corp Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Corp Bond and IShares NASDAQ 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 NASDAQ 100 are associated (or correlated) with IShares Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Corp Bond has no effect on the direction of IShares NASDAQ i.e., IShares NASDAQ and IShares Corp go up and down completely randomly.

Pair Corralation between IShares NASDAQ and IShares Corp

Assuming the 90 days trading horizon iShares NASDAQ 100 is expected to generate 7.51 times more return on investment than IShares Corp. However, IShares NASDAQ is 7.51 times more volatile than iShares Corp Bond. It trades about 0.18 of its potential returns per unit of risk. iShares Corp Bond is currently generating about 0.07 per unit of risk. If you would invest  118,220  in iShares NASDAQ 100 on September 28, 2024 and sell it today you would earn a total of  4,060  from holding iShares NASDAQ 100 or generate 3.43% return on investment over 90 days.

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

iShares NASDAQ 100  vs.  iShares Corp Bond

iShares NASDAQ 100

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares NASDAQ 100 are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, IShares NASDAQ may actually be approaching a critical reversion point that can send shares even higher in January 2025.

iShares Corp Bond

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Corp Bond are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, IShares Corp 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 NASDAQ and IShares Corp

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

The idea behind iShares NASDAQ 100 and iShares Corp Bond 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.