Correlation Between IShares Core and Source Markets

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

Diversification Opportunities for IShares Core and Source Markets

0.64

Correlation Coefficient

IShares Core  Source Markets

Poor diversification

The 3 months correlation between IShares and Source is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core MSCI and Source Markets plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Source Markets plc 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 Source Markets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Source Markets plc has no effect on the direction of IShares Core i.e., IShares Core and Source Markets go up and down completely randomly.

Pair Corralation between IShares Core and Source Markets

Assuming the 90 days trading horizon iShares Core MSCI is expected to generate 0.6 times more return on investment than Source Markets. However, iShares Core MSCI is 1.66 times less risky than Source Markets. It trades about 0.07 of its potential returns per unit of risk. Source Markets plc is currently generating about 0.0 per unit of risk. If you would invest  388.00  in iShares Core MSCI on October 3, 2024 and sell it today you would earn a total of  65.00  from holding iShares Core MSCI or generate 16.75% return on investment over 90 days.

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

iShares Core MSCI  vs.  Source Markets plc

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.

Source Markets plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Source Markets plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile 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 Source Markets

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

The idea behind iShares Core MSCI and Source Markets plc 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.