Correlation Between IShares Core and IncomeShares Nasdaq

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

By analyzing existing cross correlation between iShares Core MSCI and IncomeShares Nasdaq 100, you can compare the effects of market volatilities on IShares Core and IncomeShares Nasdaq 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 Core with a short position of IncomeShares Nasdaq. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and IncomeShares Nasdaq.

Diversification Opportunities for IShares Core and IncomeShares Nasdaq

-0.22

Correlation Coefficient

IShares Core  IncomeShares Nasdaq

Very good diversification

The 3 months correlation between IShares and IncomeShares is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core MSCI and IncomeShares Nasdaq 100 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IncomeShares Nasdaq 100 and IShares Core 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 Core MSCI are associated (or correlated) with IncomeShares Nasdaq. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IncomeShares Nasdaq 100 has no effect on the direction of IShares Core i.e., IShares Core and IncomeShares Nasdaq go up and down completely randomly.

Pair Corralation between IShares Core and IncomeShares Nasdaq

Assuming the 90 days trading horizon iShares Core MSCI is expected to generate 0.64 times more return on investment than IncomeShares Nasdaq. However, iShares Core MSCI is 1.56 times less risky than IncomeShares Nasdaq. It trades about -0.03 of its potential returns per unit of risk. IncomeShares Nasdaq 100 is currently generating about -0.14 per unit of risk. If you would invest  462.00  in iShares Core MSCI on October 9, 2024 and sell it today you would lose (6.00) from holding iShares Core MSCI or give up 1.3% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	54.24%
Values	Daily Returns

iShares Core MSCI  vs.  IncomeShares Nasdaq 100

iShares Core MSCI

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Core MSCI has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, IShares Core is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

IncomeShares Nasdaq 100

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IncomeShares Nasdaq 100 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Etf's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

Pair Trading with IShares Core and IncomeShares Nasdaq

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

The idea behind iShares Core MSCI and IncomeShares Nasdaq 100 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 Global Correlations module to find global opportunities by holding instruments from different markets.