Correlation Between IShares Trust and ETRACS Monthly

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

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

Diversification Opportunities for IShares Trust and ETRACS Monthly

0.5

Correlation Coefficient

IShares Trust  ETRACS Monthly

Very weak diversification

The 3 months correlation between IShares and ETRACS is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding iShares Trust and ETRACS Monthly Pay in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETRACS Monthly Pay and IShares Trust 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 Trust are associated (or correlated) with ETRACS Monthly. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETRACS Monthly Pay has no effect on the direction of IShares Trust i.e., IShares Trust and ETRACS Monthly go up and down completely randomly.

Pair Corralation between IShares Trust and ETRACS Monthly

Given the investment horizon of 90 days iShares Trust is expected to generate 0.2 times more return on investment than ETRACS Monthly. However, iShares Trust is 4.95 times less risky than ETRACS Monthly. It trades about 0.06 of its potential returns per unit of risk. ETRACS Monthly Pay is currently generating about 0.0 per unit of risk. If you would invest  3,124  in iShares Trust on December 29, 2024 and sell it today you would earn a total of  22.00  from holding iShares Trust or generate 0.7% return on investment over 90 days.

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

iShares Trust   vs.  ETRACS Monthly Pay

iShares Trust

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Trust are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable technical and fundamental indicators, IShares Trust is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

ETRACS Monthly Pay

Risk-Adjusted Performance

Weak

Over the last 90 days ETRACS Monthly Pay has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, ETRACS Monthly 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 Trust and ETRACS Monthly

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

The idea behind iShares Trust and ETRACS Monthly Pay 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.