Correlation Between IShares Core and Madison ETFs

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

By analyzing existing cross correlation between iShares Core Dividend and Madison ETFs Trust, you can compare the effects of market volatilities on IShares Core and Madison ETFs 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 Madison ETFs. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and Madison ETFs.

Diversification Opportunities for IShares Core and Madison ETFs

0.95

Correlation Coefficient

IShares Core  Madison ETFs

Almost no diversification

The 3 months correlation between IShares and Madison is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core Dividend and Madison ETFs Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Madison ETFs Trust 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 Dividend are associated (or correlated) with Madison ETFs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Madison ETFs Trust has no effect on the direction of IShares Core i.e., IShares Core and Madison ETFs go up and down completely randomly.

Pair Corralation between IShares Core and Madison ETFs

Given the investment horizon of 90 days iShares Core Dividend is expected to generate 0.97 times more return on investment than Madison ETFs. However, iShares Core Dividend is 1.03 times less risky than Madison ETFs. It trades about -0.21 of its potential returns per unit of risk. Madison ETFs Trust is currently generating about -0.29 per unit of risk. If you would invest  6,341  in iShares Core Dividend on October 9, 2024 and sell it today you would lose (207.00) from holding iShares Core Dividend or give up 3.26% of portfolio value over 90 days.

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

iShares Core Dividend  vs.  Madison ETFs Trust

iShares Core Dividend

Risk-Adjusted Performance

0 of 100

Very Weak

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

Madison ETFs Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Madison ETFs Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Madison ETFs is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with IShares Core and Madison ETFs

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

The idea behind iShares Core Dividend and Madison ETFs Trust 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.