Correlation Between BetaShares Geared and IShares Core

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

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

Diversification Opportunities for BetaShares Geared and IShares Core

0.84

Correlation Coefficient

BetaShares Geared  IShares Core

Very poor diversification

The 3 months correlation between BetaShares and IShares is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding BetaShares Geared Australian and iShares Core MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core MSCI and BetaShares Geared 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 BetaShares Geared Australian 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 MSCI has no effect on the direction of BetaShares Geared i.e., BetaShares Geared and IShares Core go up and down completely randomly.

Pair Corralation between BetaShares Geared and IShares Core

Assuming the 90 days trading horizon BetaShares Geared Australian is expected to generate 1.83 times more return on investment than IShares Core. However, BetaShares Geared is 1.83 times more volatile than iShares Core MSCI. It trades about 0.16 of its potential returns per unit of risk. iShares Core MSCI is currently generating about 0.16 per unit of risk. If you would invest  2,961  in BetaShares Geared Australian on September 4, 2024 and sell it today you would earn a total of  418.00  from holding BetaShares Geared Australian or generate 14.12% return on investment over 90 days.

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

BetaShares Geared Australian  vs.  iShares Core MSCI

BetaShares Geared

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BetaShares Geared Australian are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, BetaShares Geared unveiled solid returns over the last few months and may actually be approaching a breakup point.

iShares Core MSCI

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core MSCI are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, IShares Core may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with BetaShares Geared and IShares Core

The main advantage of trading using opposite BetaShares Geared and IShares Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BetaShares Geared 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 BetaShares Geared Australian and iShares Core MSCI 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.