Correlation Between IShares SMIM and IShares VII

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

Diversification Opportunities for IShares SMIM and IShares VII

0.7

Correlation Coefficient

IShares SMIM  IShares VII

Poor diversification

The 3 months correlation between IShares and IShares is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding iShares SMIM ETF and iShares VII PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares VII PLC 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 VII. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares VII PLC has no effect on the direction of IShares SMIM i.e., IShares SMIM and IShares VII go up and down completely randomly.

Pair Corralation between IShares SMIM and IShares VII

Assuming the 90 days trading horizon IShares SMIM is expected to generate 1.01 times less return on investment than IShares VII. But when comparing it to its historical volatility, iShares SMIM ETF is 1.32 times less risky than IShares VII. It trades about 0.56 of its potential returns per unit of risk. iShares VII PLC is currently generating about 0.43 of returns per unit of risk over similar time horizon. If you would invest  761.00  in iShares VII PLC on October 20, 2024 and sell it today you would earn a total of  39.00  from holding iShares VII PLC or generate 5.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	94.12%
Values	Daily Returns

iShares SMIM ETF  vs.  iShares VII PLC

iShares SMIM ETF

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares SMIM ETF has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, IShares SMIM is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

iShares VII PLC

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares VII PLC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, IShares VII is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with IShares SMIM and IShares VII

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

The idea behind iShares SMIM ETF and iShares VII PLC 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 CEOs Directory module to screen CEOs from public companies around the world.