Correlation Between Dynamic Active and IShares 1

Can any of the company-specific risk be diversified away by investing in both Dynamic Active and IShares 1 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 1 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dynamic Active Preferred and iShares 1 5 Year, you can compare the effects of market volatilities on Dynamic Active and IShares 1 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 1. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dynamic Active and IShares 1.

Diversification Opportunities for Dynamic Active and IShares 1

0.6

Correlation Coefficient

Dynamic Active  IShares 1

Poor diversification

The 3 months correlation between Dynamic and IShares is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Dynamic Active Preferred and iShares 1 5 Year in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares 1 5 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 Preferred are associated (or correlated) with IShares 1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares 1 5 has no effect on the direction of Dynamic Active i.e., Dynamic Active and IShares 1 go up and down completely randomly.

Pair Corralation between Dynamic Active and IShares 1

Assuming the 90 days trading horizon Dynamic Active Preferred is expected to generate 3.13 times more return on investment than IShares 1. However, Dynamic Active is 3.13 times more volatile than iShares 1 5 Year. It trades about 0.12 of its potential returns per unit of risk. iShares 1 5 Year is currently generating about 0.22 per unit of risk. If you would invest  2,115  in Dynamic Active Preferred on September 13, 2024 and sell it today you would earn a total of  185.00  from holding Dynamic Active Preferred or generate 8.75% return on investment over 90 days.

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

Dynamic Active Preferred  vs.  iShares 1 5 Year

Dynamic Active Preferred

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dynamic Active Preferred are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Dynamic Active is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

iShares 1 5

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares 1 5 Year are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, IShares 1 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 1

The main advantage of trading using opposite Dynamic Active and IShares 1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dynamic Active position performs unexpectedly, IShares 1 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 1 will offset losses from the drop in IShares 1's long position.

The idea behind Dynamic Active Preferred and iShares 1 5 Year 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.

Check out your portfolio center.

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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.