Correlation Between IShares SP and USCF ETF

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

Diversification Opportunities for IShares SP and USCF ETF

0.47

Correlation Coefficient

IShares SP  USCF ETF

Very weak diversification

The 3 months correlation between IShares and USCF is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding iShares SP GSCI and USCF ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on USCF ETF Trust 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 USCF ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of USCF ETF Trust has no effect on the direction of IShares SP i.e., IShares SP and USCF ETF go up and down completely randomly.

Pair Corralation between IShares SP and USCF ETF

Considering the 90-day investment horizon iShares SP GSCI is expected to generate 1.0 times more return on investment than USCF ETF. However, iShares SP GSCI is 1.0 times less risky than USCF ETF. It trades about 0.1 of its potential returns per unit of risk. USCF ETF Trust is currently generating about 0.05 per unit of risk. If you would invest  2,142  in iShares SP GSCI on December 27, 2024 and sell it today you would earn a total of  102.00  from holding iShares SP GSCI or generate 4.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

iShares SP GSCI  vs.  USCF ETF Trust

iShares SP GSCI

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares SP GSCI are ranked lower than 7 (%) 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.

USCF ETF Trust

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in USCF ETF Trust are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, USCF ETF is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with IShares SP and USCF ETF

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

The idea behind iShares SP GSCI and USCF ETF Trust 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.