Correlation Between IShares Trust and Strategy Shares

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

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

Diversification Opportunities for IShares Trust and Strategy Shares

0.01

Correlation Coefficient

IShares Trust  Strategy Shares

Significant diversification

The 3 months correlation between IShares and Strategy is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding iShares Trust and Strategy Shares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strategy Shares and IShares Trust 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 Trust are associated (or correlated) with Strategy Shares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strategy Shares has no effect on the direction of IShares Trust i.e., IShares Trust and Strategy Shares go up and down completely randomly.

Pair Corralation between IShares Trust and Strategy Shares

Given the investment horizon of 90 days iShares Trust is expected to under-perform the Strategy Shares. In addition to that, IShares Trust is 1.54 times more volatile than Strategy Shares. It trades about -0.12 of its total potential returns per unit of risk. Strategy Shares is currently generating about -0.05 per unit of volatility. If you would invest  2,466  in Strategy Shares on December 22, 2024 and sell it today you would lose (84.00) from holding Strategy Shares or give up 3.41% of portfolio value over 90 days.

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

iShares Trust   vs.  Strategy Shares

iShares Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Etf's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

Strategy Shares

Risk-Adjusted Performance

Very Weak

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

Pair Trading with IShares Trust and Strategy Shares

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

The idea behind iShares Trust and Strategy Shares 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.