Correlation Between IShares Dividend and IShares Core

Can any of the company-specific risk be diversified away by investing in both IShares Dividend 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 Dividend 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 Dividend Growers and iShares Core MSCI, you can compare the effects of market volatilities on IShares Dividend 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 Dividend with a short position of IShares Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Dividend and IShares Core.

Diversification Opportunities for IShares Dividend and IShares Core

0.24

Correlation Coefficient

IShares Dividend  IShares Core

Modest diversification

The 3 months correlation between IShares and IShares is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding iShares Dividend Growers and iShares Core MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core MSCI and IShares Dividend 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 Dividend Growers 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 MSCI has no effect on the direction of IShares Dividend i.e., IShares Dividend and IShares Core go up and down completely randomly.

Pair Corralation between IShares Dividend and IShares Core

Assuming the 90 days trading horizon IShares Dividend is expected to generate 3.33 times less return on investment than IShares Core. In addition to that, IShares Dividend is 1.1 times more volatile than iShares Core MSCI. It trades about 0.02 of its total potential returns per unit of risk. iShares Core MSCI is currently generating about 0.08 per unit of volatility. If you would invest  2,446  in iShares Core MSCI on September 22, 2024 and sell it today you would earn a total of  732.00  from holding iShares Core MSCI or generate 29.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

iShares Dividend Growers  vs.  iShares Core MSCI

iShares Dividend Growers

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Dividend Growers has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, IShares Dividend is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

iShares Core MSCI

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Core MSCI has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical indicators, IShares Core is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with IShares Dividend and IShares Core

The main advantage of trading using opposite IShares Dividend and IShares Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Dividend 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 Dividend Growers and iShares Core MSCI 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..