Correlation Between IShares Core and IShares SLI

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

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

Diversification Opportunities for IShares Core and IShares SLI

0.25

Correlation Coefficient

IShares Core  IShares SLI

Modest diversification

The 3 months correlation between IShares and IShares is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SP and iShares SLI ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares SLI ETF and IShares Core 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 Core SP are associated (or correlated) with IShares SLI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares SLI ETF has no effect on the direction of IShares Core i.e., IShares Core and IShares SLI go up and down completely randomly.

Pair Corralation between IShares Core and IShares SLI

Assuming the 90 days trading horizon iShares Core SP is expected to under-perform the IShares SLI. In addition to that, IShares Core is 1.24 times more volatile than iShares SLI ETF. It trades about -0.19 of its total potential returns per unit of risk. iShares SLI ETF is currently generating about 0.12 per unit of volatility. If you would invest  21,860  in iShares SLI ETF on December 5, 2024 and sell it today you would earn a total of  455.00  from holding iShares SLI ETF or generate 2.08% return on investment over 90 days.

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

iShares Core SP  vs.  iShares SLI ETF

iShares Core SP

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Core SP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, IShares Core is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

iShares SLI ETF

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares SLI ETF are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, IShares SLI may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with IShares Core and IShares SLI

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

The idea behind iShares Core SP and iShares SLI ETF 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.