Correlation Between Dynamic Active and IShares Core

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

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

Diversification Opportunities for Dynamic Active and IShares Core

0.66

Correlation Coefficient

Dynamic Active  IShares Core

Poor diversification

The 3 months correlation between Dynamic and IShares is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Dynamic Active Global and iShares Core Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core Equity and Dynamic Active 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 Dynamic Active Global 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 Equity has no effect on the direction of Dynamic Active i.e., Dynamic Active and IShares Core go up and down completely randomly.

Pair Corralation between Dynamic Active and IShares Core

Assuming the 90 days trading horizon Dynamic Active Global is expected to under-perform the IShares Core. In addition to that, Dynamic Active is 1.74 times more volatile than iShares Core Equity. It trades about -0.08 of its total potential returns per unit of risk. iShares Core Equity is currently generating about 0.0 per unit of volatility. If you would invest  3,357  in iShares Core Equity on December 30, 2024 and sell it today you would lose (8.00) from holding iShares Core Equity or give up 0.24% of portfolio value over 90 days.

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

Dynamic Active Global  vs.  iShares Core Equity

Dynamic Active Global

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dynamic Active Global has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Etf's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

iShares Core Equity

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Core Equity 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 recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Dynamic Active and IShares Core

The main advantage of trading using opposite Dynamic Active and IShares Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dynamic Active 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 Dynamic Active Global and iShares Core Equity 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.