Correlation Between IShares SP and IShares GSCI

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

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

Diversification Opportunities for IShares SP and IShares GSCI

0.99

Correlation Coefficient

IShares SP  IShares GSCI

No risk reduction

The 3 months correlation between IShares and IShares is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding iShares SP GSCI and iShares GSCI Commodity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares GSCI Commodity and IShares SP 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 SP GSCI are associated (or correlated) with IShares GSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares GSCI Commodity has no effect on the direction of IShares SP i.e., IShares SP and IShares GSCI go up and down completely randomly.

Pair Corralation between IShares SP and IShares GSCI

Considering the 90-day investment horizon IShares SP is expected to generate 1.11 times less return on investment than IShares GSCI. In addition to that, IShares SP is 1.12 times more volatile than iShares GSCI Commodity. It trades about 0.07 of its total potential returns per unit of risk. iShares GSCI Commodity is currently generating about 0.09 per unit of volatility. If you would invest  2,514  in iShares GSCI Commodity on December 29, 2024 and sell it today you would earn a total of  96.00  from holding iShares GSCI Commodity or generate 3.82% return on investment over 90 days.

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

iShares SP GSCI  vs.  iShares GSCI Commodity

iShares SP GSCI

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares SP GSCI are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, IShares SP is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

iShares GSCI Commodity

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares GSCI Commodity are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable primary indicators, IShares GSCI is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with IShares SP and IShares GSCI

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

The idea behind iShares SP GSCI and iShares GSCI Commodity 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.