Correlation Between IShares SP and United States

Can any of the company-specific risk be diversified away by investing in both IShares SP and United States 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 United States 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 United States Commodity, you can compare the effects of market volatilities on IShares SP and United States 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 United States. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares SP and United States.

Diversification Opportunities for IShares SP and United States

0.72

Correlation Coefficient

IShares SP  United States

Poor diversification

The 3 months correlation between IShares and United is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding iShares SP GSCI and United States Commodity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United States 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 United States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United States Commodity has no effect on the direction of IShares SP i.e., IShares SP and United States go up and down completely randomly.

Pair Corralation between IShares SP and United States

Considering the 90-day investment horizon IShares SP is expected to generate 2.43 times less return on investment than United States. In addition to that, IShares SP is 1.17 times more volatile than United States Commodity. It trades about 0.07 of its total potential returns per unit of risk. United States Commodity is currently generating about 0.2 per unit of volatility. If you would invest  6,580  in United States Commodity on December 28, 2024 and sell it today you would earn a total of  574.82  from holding United States Commodity or generate 8.74% return on investment over 90 days.

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

iShares SP GSCI  vs.  United States 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.

United States Commodity

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in United States Commodity are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak fundamental indicators, United States may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with IShares SP and United States

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

The idea behind iShares SP GSCI and United States 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.