Correlation Between IShares Ultra and Vulcan Value

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

By analyzing existing cross correlation between iShares Ultra Short Term and Vulcan Value Partners, you can compare the effects of market volatilities on IShares Ultra and Vulcan Value 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 Ultra with a short position of Vulcan Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Ultra and Vulcan Value.

Diversification Opportunities for IShares Ultra and Vulcan Value

-0.58

Correlation Coefficient

IShares Ultra  Vulcan Value

Excellent diversification

The 3 months correlation between IShares and Vulcan is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding iShares Ultra Short Term and Vulcan Value Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vulcan Value Partners and IShares Ultra 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 Ultra Short Term are associated (or correlated) with Vulcan Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vulcan Value Partners has no effect on the direction of IShares Ultra i.e., IShares Ultra and Vulcan Value go up and down completely randomly.

Pair Corralation between IShares Ultra and Vulcan Value

Given the investment horizon of 90 days iShares Ultra Short Term is expected to generate 0.03 times more return on investment than Vulcan Value. However, iShares Ultra Short Term is 31.71 times less risky than Vulcan Value. It trades about 0.58 of its potential returns per unit of risk. Vulcan Value Partners is currently generating about -0.07 per unit of risk. If you would invest  5,003  in iShares Ultra Short Term on September 16, 2024 and sell it today you would earn a total of  52.00  from holding iShares Ultra Short Term or generate 1.04% return on investment over 90 days.

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

iShares Ultra Short Term  vs.  Vulcan Value Partners

iShares Ultra Short

Risk-Adjusted Performance

45 of 100

Excellent

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Ultra Short Term are ranked lower than 45 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, IShares Ultra is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Vulcan Value Partners

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vulcan Value Partners has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Vulcan Value is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IShares Ultra and Vulcan Value

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

The idea behind iShares Ultra Short Term and Vulcan Value Partners 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.