Correlation Between IShares SMIM and IShares Core

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

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

Diversification Opportunities for IShares SMIM and IShares Core

0.92

Correlation Coefficient

IShares SMIM  IShares Core

Almost no diversification

The 3 months correlation between IShares and IShares is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding iShares SMIM ETF and iShares Core SPI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core SPI and IShares SMIM 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 SMIM ETF are associated (or correlated) with IShares Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Core SPI has no effect on the direction of IShares SMIM i.e., IShares SMIM and IShares Core go up and down completely randomly.

Pair Corralation between IShares SMIM and IShares Core

Assuming the 90 days trading horizon IShares SMIM is expected to generate 2.05 times less return on investment than IShares Core. But when comparing it to its historical volatility, iShares SMIM ETF is 1.0 times less risky than IShares Core. It trades about 0.13 of its potential returns per unit of risk. iShares Core SPI is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  13,851  in iShares Core SPI on December 25, 2024 and sell it today you would earn a total of  1,529  from holding iShares Core SPI or generate 11.04% return on investment over 90 days.

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

iShares SMIM ETF  vs.  iShares Core SPI

iShares SMIM ETF

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares SMIM ETF are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, IShares SMIM is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

iShares Core SPI

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core SPI are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, IShares Core may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with IShares SMIM and IShares Core

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

The idea behind iShares SMIM ETF and iShares Core SPI 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.