Correlation Between IShares Core and IShares Expanded

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

Diversification Opportunities for IShares Core and IShares Expanded

0.53

Correlation Coefficient

IShares Core  IShares Expanded

Very weak diversification

The 3 months correlation between IShares and IShares is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core Dividend and iShares Expanded Tech Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Expanded Tech 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 IShares Expanded. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Expanded Tech has no effect on the direction of IShares Core i.e., IShares Core and IShares Expanded go up and down completely randomly.

Pair Corralation between IShares Core and IShares Expanded

Given the investment horizon of 90 days iShares Core Dividend is expected to generate 0.42 times more return on investment than IShares Expanded. However, iShares Core Dividend is 2.4 times less risky than IShares Expanded. It trades about 0.01 of its potential returns per unit of risk. iShares Expanded Tech Software is currently generating about -0.07 per unit of risk. If you would invest  6,093  in iShares Core Dividend on December 29, 2024 and sell it today you would earn a total of  22.00  from holding iShares Core Dividend or generate 0.36% return on investment over 90 days.

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

iShares Core Dividend  vs.  iShares Expanded Tech Software

iShares Core Dividend

Risk-Adjusted Performance

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.

iShares Expanded Tech

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Expanded Tech Software has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Etf's technical and fundamental indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the fund sophisticated investors.

Pair Trading with IShares Core and IShares Expanded

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

The idea behind iShares Core Dividend and iShares Expanded Tech Software 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.