Correlation Between IShares Core and IShares SMI

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

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

Diversification Opportunities for IShares Core and IShares SMI

0.28

Correlation Coefficient

IShares Core  IShares SMI

Modest diversification

The 3 months correlation between IShares and IShares is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core MSCI and iShares SMI ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares SMI ETF 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 MSCI are associated (or correlated) with IShares SMI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares SMI ETF has no effect on the direction of IShares Core i.e., IShares Core and IShares SMI go up and down completely randomly.

Pair Corralation between IShares Core and IShares SMI

Assuming the 90 days trading horizon iShares Core MSCI is expected to under-perform the IShares SMI. In addition to that, IShares Core is 1.41 times more volatile than iShares SMI ETF. It trades about -0.04 of its total potential returns per unit of risk. iShares SMI ETF is currently generating about 0.46 per unit of volatility. If you would invest  11,820  in iShares SMI ETF on October 20, 2024 and sell it today you would earn a total of  610.00  from holding iShares SMI ETF or generate 5.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	94.12%
Values	Daily Returns

iShares Core MSCI  vs.  iShares SMI ETF

iShares Core MSCI

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Core MSCI has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, IShares Core is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

iShares SMI ETF

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares SMI ETF has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, IShares SMI is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with IShares Core and IShares SMI

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

The idea behind iShares Core MSCI and iShares SMI ETF 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.