Correlation Between IShares Core and IShares TecDAX

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

Diversification Opportunities for IShares Core and IShares TecDAX

-0.05

Correlation Coefficient

IShares Core  IShares TecDAX

Good diversification

The 3 months correlation between IShares and IShares is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SP and iShares TecDAX UCITS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares TecDAX UCITS 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 TecDAX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares TecDAX UCITS has no effect on the direction of IShares Core i.e., IShares Core and IShares TecDAX go up and down completely randomly.

Pair Corralation between IShares Core and IShares TecDAX

Assuming the 90 days trading horizon iShares Core SP is expected to under-perform the IShares TecDAX. But the etf apears to be less risky and, when comparing its historical volatility, iShares Core SP is 1.11 times less risky than IShares TecDAX. The etf trades about -0.09 of its potential returns per unit of risk. The iShares TecDAX UCITS is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  3,052  in iShares TecDAX UCITS on December 24, 2024 and sell it today you would earn a total of  285.00  from holding iShares TecDAX UCITS or generate 9.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.31%
Values	Daily Returns

iShares Core SP  vs.  iShares TecDAX UCITS

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 TecDAX UCITS

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares TecDAX UCITS are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal basic indicators, IShares TecDAX may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with IShares Core and IShares TecDAX

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

The idea behind iShares Core SP and iShares TecDAX UCITS 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.